K.H. v. Secretary of the Department of Homeland Security, No. 3:2015cv02740 - Document 149 (N.D. Cal. 2018)
Court Description: ORDER GRANTING FINAL APPROVAL OF COLLECTIVE ACTION SETTLEMENT by Judge Jon S. Tigar granting 147 Motion Final Approval of Collective Action Agreement. (wsn, COURT STAFF) (Filed on 12/17/2018)
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K.H. v. Secretary of the Department of Homeland Security Doc. 149 1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 K.H., ET AL., 7 Plaintiffs, 8 v. 9 United States District Court Northern District of California Case No. 15-cv-02740-JST 10 SECRETARY OF THE DEPARTMENT OF HOMELAND SECURITY, 11 Defendant. ORDER GRANTING FINAL APPROVAL OF COLLECTIVE ACTION SETTLEMENT Re: ECF No. 147 12 Before the Court is Plaintiffs’ and Defendant’s renewed joint motion for final approval of a 13 14 collective action settlement. ECF No. 147. For the reasons stated below, the Court will grant the 15 motion. 16 I. 17 18 BACKGROUND A. Factual Background The Federal Air Marshal Service (“the Service”) is a federal law enforcement agency 19 within the Transportation Security Administration (“TSA”) whose mission “is to protect the 20 nation’s commercial aviation system, by detecting, deterring, and defeating hostile acts targeting 21 U.S. air carriers, airports, passengers and crews.” ECF No. 70 ¶ 2. Before the September 11, 22 2001 attacks, the Service had only thirty-three Federal Air Marshals (“FAMs”). Id. ¶ 4. After the 23 attacks, “President George W. Bush ordered the rapid expansion of the [Service]” and “thousands 24 of FAMs were added to the ranks.” Id. 25 Until 2014, each FAM worked out of one of the Service’s twenty-six field offices across 26 the country. ECF No. 70-2 at 5. In 2014, the Service and the TSA approved the closure of field 27 28 Dockets.Justia.com 1 offices in Cincinnati, Cleveland, Phoenix, Pittsburgh, San Diego, and Tampa.1 ECF No. 70 ¶ 20, 2 29. Plaintiffs are current and former FAMs employed by Defendant, the Secretary of the 3 4 Department of Homeland Security. ECF No. 50 ¶¶ 4-8 (Second Amended Complaint). All are 5 over forty years of age. Id. Plaintiffs allege that the TSA targeted the six Field Offices for closure 6 in an attempt to drive out older FAMs “so that it could in turn ‘hire two young FAMs for every 7 older FAM.’” Id. at ¶¶14-16. Plaintiffs claim that “[t]he actual process in which TSA designated 8 the Field Offices for closure was based on age discrimination and designed to rid older FAMs 9 from its workforce.” Id. at ¶ 31. Plaintiffs allege damages of lost wages, leave hours, and mental United States District Court Northern District of California 10 and emotional distress. Id. ¶¶ 24-29. 11 B. Procedural Background 12 Plaintiff K.H. filed suit on behalf himself and all similarly situated FAMs in the six closed 13 offices on June 18, 2015. ECF No. 1. The Second Amended Complaint, alleging disparate 14 treatment and disparate impact claims under the Age Discrimination in Employment Act 15 (“ADEA”), was filed on May 11, 2016. ECF No. 50. On July 18, 2016, the Court granted Plaintiffs’ Motion for Conditional Certification of a 16 17 Collective Action, and conditionally certified the following class: 18 All Federal Air Marshals who were impacted by the closure of the Federal Air Marshal Service‘s Cincinnati, Cleveland, Phoenix, Pittsburgh, San Diego, and Tampa offices and who were over 40 years of age at the time the decision to close the offices was made. 19 20 21 22 23 24 ECF No. 56 at 6. On June 30, 2017, the Court granted summary judgment as to Plaintiffs’ disparate impact claim, and denied it as to their disparate treatment claim. ECF No. 103 at 18. Shortly thereafter, with the assistance of Magistrate Judge Beeler acting as a settlement judge, the parties entered into a conditional settlement agreement. ECF No. 137 at 6. On July 26, 2018, the Court denied without prejudice the parties’ joint motion for approval 25 26 of their settlement agreement. ECF No. 146. The Court concluded that the scope of claims 27 28 A more complete recitation of the facts is contained in the Court’s order granting in part and denying in part Defendant’s motion for summary judgment. ECF No. 103 at 1-4. 2 1 1 released under the agreement was improperly broad and that the parties had provided insufficient 2 information for the Court to determine the reasonableness of either the compensation to Plaintiffs 3 or Plaintiffs’ counsel’s requested attorneys’ fees. Id. at 7-11. Plaintiffs and Defendant have modified the settlement agreement and now renew their joint 4 United States District Court Northern District of California 5 move for final approval. ECF No. 147. 6 C. Overview of Settlement Agreement 7 Under the terms of the settlement agreement, Defendant agrees to pay each class member 8 who separated from the Service a total sum of $1,500. ECF No. 144 at 2. There will be no tax 9 withholding from this amount. Id. For each class member who remains employed with the 10 Service, Defendant agrees to provide seven additional days of leave, reflected as fifty-six hours of 11 restored annual leave in the Service’s accounting system. Id. at 2-3. Finally, Defendant will pay 12 Plaintiffs’ counsel $425,000 in full satisfaction of all claims for attorney’s fees and costs. Id. at 4. 13 In exchange, Plaintiffs agree to release certain claims. Id. at 3. The parties have executed 14 an addendum to the settlement agreement that limits that release to, in general terms, all possible 15 claims arising out of the complaint’s specific allegations regarding Defendant’s decision to close 16 the six offices. ECF No. 147-1 at 3. 17 II. LEGAL STANDARD 18 A. Authority to Review 19 The ADEA makes it unlawful for an employer to discriminate against employees on the 20 basis of age. 29 U.S.C. § 623(a)(2). Employees may bring collective age discrimination actions 21 under the ADEA, which “shall be enforced using certain of the powers, remedies, and procedures 22 of the [Fair Labor Standards Act (FLSA)].” Church v. Consolidated Freightways, Inc., 137 23 F.R.D. 294, 298-99 (N.D. Cal 1991); see also 29 U.S.C. § 626(b). Collective actions allow 24 aggrieved employees “the advantage of lower individual costs to vindicate rights by the pooling of 25 resources.” Hoffman-La Roche Inc. v. Sperling, 493 U.S. 165, 170 (1989) (discussing FLSA 26 collective action provision, 29 U.S.C. § 216(b), in context of ADEA claims). Under § 216(b), 27 collective actions against employers may be brought “in any Federal or State court of competent 28 jurisdiction by any one or more employees for and in behalf of himself or themselves and other 3 1 employees similarly situated.” 29 U.S.C. § 216(b). “Rule 23 actions are fundamentally different from collective actions under the FLSA.” United States District Court Northern District of California 2 3 Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66, 74 (2013) (citing Sperling, 493 U.S. at 177- 4 78). While class members in a Rule 23 class action may be bound by a judgment without their 5 consent, members in a collective action must expressly opt in to the collective action by written 6 consent. 29 U.S.C. § 216(b) (“No employee shall be a party plaintiff to any such action unless he 7 gives his consent in writing to become such a party and such consent is filed in the court in which 8 such action is brought.”); see Fed. R. Civ. P. 23. Further, while Rule 23 expressly requires that 9 courts review settlement agreements that bind class members for fairness, reasonableness, and 10 adequacy, there is no such statutory requirement in the FLSA or the ADEA. See Fed. R. Civ. P. 11 23(e)(2). As explained in the Court’s prior order, the Court has authority to approve the parties’ 12 13 settlement agreement. See ECF No. 146 at 4-5. 14 B. Standard of Review 15 The Ninth Circuit has not established the criteria that a district court must consider in 16 determining whether a collective action settlement agreement under 29 U.S.C. § 216(b) warrants 17 approval. Most courts, however, evaluate the settlement under the standard established by the 18 Eleventh Circuit, which requires the settlement to constitute “a fair and reasonable resolution of a 19 bona fide dispute over FLSA provisions.” 2 See Lynn’s Food Stores, Inc. v. United States, 679 20 F.2d 1350, 1355 (11th Cir. 1982). “If a settlement in an employee FLSA suit does reflect a 21 reasonable compromise over issues . . . that are actually in dispute,” the district court may 22 “approve the settlement in order to promote the policy of encouraging settlement of litigation.” Id. 23 at 1354. 24 25 26 27 28 2 See, e.g., Slezak v. City of Palo Alto, No. 16-CV-03224-LHK, 2017 WL 2688224, at *2 (N.D. Cal. June 22, 2017); Dunn v. Teachers Ins. & Annuity Ass’n of Am., No. 13-CV-05456-HSG, 2016 WL 153266, at *3 (N.D. Cal. Jan. 13, 2016); Otey v. CrowdFlower, Inc., No. 12-CV-05524-JST, 2014 WL 12643008, at *3 (N.D. Cal. Dec. 26, 2014); Nen Thio v. Genji, LLC, 14 F. Supp. 3d 1324, 1333 (N.D. Cal. 2014). 4 1 DISCUSSION 2 A. 3 Having previously concluded that this action presents a bona fide dispute under the ADEA, 4 Bona Fide Dispute see ECF No. 146 at 6, the Court turns to whether the settlement is fair and reasonable. 5 B. 6 In evaluating a proposed FLSA settlement, a district court must determine whether the Fair and Reasonable Settlement Agreement 7 settlement reflects “a fair and reasonable resolution of a bona fide dispute.” Lynn’s Food Stores, 8 679 F.2d at 1355. To determine whether a settlement is fair and reasonable, district courts 9 implicitly or explicitly consider the factors that are used to evaluate Rule 23 class action 10 11 United States District Court Northern District of California III. 12 13 14 15 settlements, which include: the strength of the plaintiffs’ case; the risk, expense, complexity, and likely duration of further litigation; the risk of maintaining class action status throughout the trial; the amount offered in settlement; the extent of discovery completed and the stage of the proceedings; the experience and views of counsel; the presence of a governmental participant; and the reaction of the class members to the proposed settlement. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998). 16 As noted in the Court’s July 26, 2018 order, several important factors weigh in favor of a 17 finding that the settlement agreement is fair and reasonable. ECF No. 146 at 6. Plaintiffs face the 18 risk of recovering nothing at trial; Magistrate Judge Beeler supervised the settlement, which was 19 the product of arm’s-length negotiations; and Plaintiffs unanimously approve the settlement terms. 20 21 22 The Court next considers the deficiencies identified in its prior order. 1. Scope of Release Provision The first iteration of the settlement agreement released any and all of Plaintiffs’ possible 23 claims arising out of their employment with Defendant, regardless of any connection to the claims 24 or allegations at issue in this action. See ECF No. 146 at 7. The Court rejected this release, 25 concluding it was impermissibly overbroad. Id. 26 27 28 The parties have narrowed the scope of the release to cover the following: such obligations, damages, liabilities, actions, causes of actions, claims and demands arising out of the allegations in the Second Amended Complaint regarding the Federal Air Marshal Service’s 5 1 2 United States District Court Northern District of California 3 decision to close six of its offices and to offer transfers to impacted Federal Air Marshals, including allegations of age discrimination as prohibited by the Age Discrimination in Employment Act, 29 U.S.C. § 633a, constructive discharge, and retaliation. ECF No. 147-1 at 3. 4 The Court concludes that the modified release is “fairly [and] reasonably tethered to the 5 consideration Plaintiffs are receiving based on their [ADEA] claims.” Dunn v. Teachers Ins. & 6 Annuity Ass’n of Am., No. 13-CV-05456-HSG, 2016 WL 153266, at *5 (N.D. Cal. Jan. 13, 2016). 7 The release covers only claims arising out of a highly specific action by Defendant, namely, 8 closing six offices, and thus “generally tracks the claims asserted in this lawsuit.” Luo v. Zynga 9 Inc., No. 13-CV-00186 NC, 2014 WL 457742, at *3 (N.D. Cal. Jan. 31, 2014) (approving FLSA 10 settlement release for all claims “arising out of or related to all claims asserted in this lawsuit” 11 (emphasis omitted)); cf. Kempen v. Matheson Tri-Gas, Inc., No. 15-CV-00660-HSG, 2017 WL 12 475095, at *5 (N.D. Cal. Feb. 6, 2017) (approving similar release in hybrid class action and 13 collective action settlement); Walsh v. CorePower Yoga LLC, No. 16-CV-05610-MEJ, 2017 WL 14 589199, at *10 (N.D. Cal. Feb. 14, 2017) (same); Collins v. Cargill Meat Sols. Corp., 274 F.R.D. 15 294, 303 (E.D. Cal. 2011) (same). Because the release is appropriately limited to claims related to 16 those litigated in this lawsuit, the Court finds it is sufficiently narrow to support approval. 17 2. Plaintiff’s Range of Recovery 18 To evaluate the adequacy of the settlement amount, “courts primarily consider plaintiffs’ 19 expected recovery balanced against the value of the settlement offer.” In re Tableware Antitrust 20 Litig., 484 F. Supp. 2d 1078, 1080 (N.D. Cal. 2007). But “[i]t is well-settled law that a cash 21 settlement amounting to only a fraction of the potential recovery does not per se render the 22 settlement inadequate or unfair.” Officers for Justice v. Civil Serv. Comm’n of City & County of 23 S.F., 688 F.2d 615, 628 (9th Cir. 1982). 24 Under the agreement, all class members who have separated from the Service will be paid 25 a total sum of $1,500, and class members who remain employed with the Service will receive 26 seven additional days of leave. ECF No. 137-1 at 3-4. Based on the additional information 27 provided by the parties, the Court now concludes that this represents a fair and reasonable 28 settlement amount in light of Plaintiffs’ range of possible recovery. 6 The parties aptly note that “[c]ompensatory damages for pain and suffering and punitive United States District Court Northern District of California 1 2 damages are not available under the ADEA,” and so Plaintiffs’ damages would have been limited 3 to “the recovery of unpaid . . . wages or overtime pay.” Ahlmeyer v. Nev. Sys. of Higher Educ., 4 555 F.3d 1051, 1059 (9th Cir. 2009) (citing 29 U.S.C. §§ 216(b), 621, 626(b)). Plaintiffs who 5 relocated to other offices were already provided five days of paid leave to move, ECF No. 81 ¶ 26, 6 and would be relying on a legally and factually speculative theory to demonstrate a limited amount 7 of lost wages, see ECF No. 147 at 9-11. Given these difficulties, seven additional days of paid 8 leave is a reasonable recovery for the relocating Plaintiffs. As for Plaintiffs who left the Service, 9 the parties agree that only four of fifty-one attempted to obtain work to mitigate their damages. Id. 10 at 12-13. Though the parties calculate that these four Plaintiffs could possibly recover up to $80- 11 100,000, they acknowledge significant issues in proving liability. Id. at 13. The Court finds that the settlement amount is fair and reasonable, given these 12 13 considerations, combined with the usual risks, costs, and delay of further litigation. In view of the factors discussed above, the Court concludes that the proposed settlement 14 15 agreement is “a fair and reasonable resolution of a bona fide dispute,” and will therefore approve 16 it. See Lynn’s Food Stores, 679 F.2d at 1355. 17 IV. 18 ATTORNEYS’ FEES AND COSTS The FLSA requires that a settlement agreement include an award of reasonable fees and 19 costs. 29 U.S.C. § 216(b) (“The court in such action shall, in addition to any judgment awarded to 20 the plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs 21 of the action.”). “The case law construing what is a reasonable fee applies uniformly to all federal 22 fee-shifting statutes.” Haworth v. Nevada, 56 F.3d 1048, 1051 (9th Cir. 1995) (internal quotation 23 marks omitted). 24 A. Fees 25 The district court has discretion to choose either the percentage-of-the-fund or the lodestar 26 method to determine what constitutes a reasonable fee. Vizcaino v. Microsoft Corp., 290 F.3d 27 1043, 1047 (9th Cir. 2002). “The ‘lodestar method’ is appropriate in class actions brought under 28 fee-shifting statutes . . . where the relief sought – and obtained – is often primarily injunctive in 7 1 nature and thus not easily monetized.” In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 2 941 (9th Cir. 2011) (citations omitted). “The lodestar figure is calculated by multiplying the 3 number of hours the prevailing party reasonably expended . . . by a reasonable hourly rate for the 4 region and for the experience of the lawyer. Though the lodestar figure is presumptively 5 reasonable, the court may adjust it upward or downward.” Id. (internal citations and quotation 6 marks omitted). On the other hand, “[w]here a settlement produces a common fund for the benefit 7 of the entire class,” courts may employ either the lodestar or the percentage-of-recovery method. 8 Id. at 942. Twenty-five percent of the fund is the benchmark for a reasonable fee award, although 9 this may be adjusted to account for special circumstances. Id. Ultimately, the district court must United States District Court Northern District of California 10 exercise its discretion to reach a reasonable result. Id. 11 Because “Defendant will pay attorneys’ fees and costs separately from, and in addition to, 12 the Settlement benefits to Class members,” the lodestar method is most appropriate in this action. 13 ECF No. 137 at 12. Here, Plaintiffs’ counsel claims to have “itemized in excess of $525,000 in 14 attorneys’ fees which had been tracked in both firms’ accounting systems during the 15 administrative and District Court phases of this litigation.” Id. Plaintiffs’ counsel also contends 16 that it “advanced in excess of $60,000 in litigation costs and expenses” during this action. Id. The 17 parties propose an attorneys’ fees award of $425,000. Id. They contend that the negotiated 18 $425,000 fee is “a result of additional compromise and negotiation designed to secure the 19 defendant’s agreement to enter into the settlement with the individual plaintiffs.” Id. at 12-13. 20 The parties note that “[n]one of the settlement benefits for Class Members will be reduced to pay 21 attorneys’ fees or to reimburse expenses of the Settlement Class Counsel.” Id. They also assert 22 that “hundreds of hours of work” have been devoted to this case, including responding to 23 discovery requests “for every one of the 185 remaining plaintiffs.” Id. 24 Pursuant to the Court’s instructions, Plaintiffs’ counsel have submitted a summary of the 25 hours spent on this litigation, demonstrating $569,046 in attorneys’ fees. ECF No. 147 at 16-19. 26 MPP/Clark Hill claims 960.5 hours of work at an average rate of roughly $289 per hour. See id. at 27 16-17. Rothman Gordon claims 798.4 hours of work at approximately $365 per hour. See id. at 28 18-19. 8 United States District Court Northern District of California 1 After reviewing the number of hours claimed, the summaries of work performed, and the 2 requested hourly rates, the Court finds the claimed lodestar to reflect a reasonable number of hours 3 at reasonable hourly rates, at least in light of the reduction in the settlement agreement. 4 B. Costs 5 An attorney is entitled to “recover as part of the award of attorney’s fees those out-of- 6 pocket expenses that would normally be charged to a fee paying client.” Harris v. Marhoefer, 24 7 F.3d 16, 19 (9th Cir. 1994) (citation omitted). To support an expense award, Plaintiffs should file 8 an itemized list of expenses by category and the total amount advanced for each category, 9 allowing the Court to assess whether the expenses are reasonable. Wren v. RGIS Inventory 10 Specialists, No. C-06-05778 JCS, 2011 WL 1230826, at *30 (N.D. Cal. Apr. 1, 2011), 11 supplemented, No. C-06-05778 JCS, 2011 WL 1838562 (N.D. Cal. May 13, 2011). Counsel must 12 also provide receipts to support their claimed expenses. MacDonald v. Ford Motor Co., No. 13- 13 CV-02988-JST, 2016 WL 3055643, at *10 (N.D. Cal. May 31, 2016), appeal dismissed, No. 16- 14 16252, 2017 WL 4011879 (9th Cir. Feb. 22, 2017). Here, Plaintiffs do not seek direct 15 reimbursement of their costs, but they do justify their attorneys’ fees request in part on the ground 16 that “counsel for plaintiffs advanced in excess of $60,000.00 in litigation costs and expenses 17 during the pendency of the matter.” ECF No. 137 at 12. 18 Per the Court’s prior order, Plaintiffs submitted a list of expenses, which relate to filing 19 fees, deposition transcripts and videography services, expert witness fees, and travel and lodging 20 expenses. ECF No. 147 at 19. In total, Plaintiffs claim $56,394.68 in costs. Id. Plaintiffs have 21 also submitted supporting receipts. See ECF No. 147-8. 22 23 24 The Court concludes that these costs are reasonable, and therefore support the requested attorneys’ fees. Given that Plaintiffs’ counsel have documented over $625,000 in fees and costs, the Court 25 finds that the $425,000 award provided for in the settlement agreement, which does not reduce 26 Plaintiffs’ recovery, is reasonable. 27 28 CONCLUSION For the foregoing reasons, the Court hereby GRANTS approval of the parties’ modified 9 1 2 3 4 5 collective action settlement. IT IS SO ORDERED. Dated: December 17, 2018 ______________________________________ JON S. TIGAR United States District Judge 6 7 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10
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