Grewe et al v. Cobalt Mortgage Inc, No. 2:2016cv00577 - Document 48 (W.D. Wash. 2016)
Court Description: ORDER GRANTING SECOND MOTION FOR SETTLEMENT APPROVAL by U.S. District Judge John C Coughenour. The settlement, including the attorney fee request, is hereby APPROVED. (PM)
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Grewe et al v. Cobalt Mortgage Inc Doc. 48 THE HONORABLE JOHN C. COUGHENOUR 1 2 3 4 5 6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 7 8 9 FRANCENE GREWE and LORI EBERHARD, on behalf of others similarly situated, 10 11 Plaintiffs, 12 CASE NO. C16-0577-JCC ORDER GRANTING SECOND MOTION FOR SETTLEMENT APPROVAL v. 13 COBALT MORTGAGE, INC., 14 Defendant. 15 This matter comes before the Court on the second motion for settlement approval 1 by 16 17 18 19 20 21 22 23 Plaintiffs Francene Grewe and Lori Eberhard and Defendant Cobalt Mortgage, Inc. (“Settlement Parties”) (Dkt. No. 36) and the response by Intervenor Eric Engelland (Dkt. No. 40). Having thoroughly considered the parties’ briefing and the relevant record, the Court finds oral argument unnecessary and APPROVES the settlement for the reasons explained herein. I. BACKGROUND The factual background of this case was summarized in a previous order. (Dkt. No. 31 at 2.) In that order, the Court considered the Settlement Parties’ motion for settlement approval and 24 25 1 Although the Settlement Parties submitted their pleading as supplemental briefing, the 26 Court treats the briefing as a second motion for approval of the collective action settlement. (See Dkt. No. 31 at 8.) ORDER GRANTING SECOND MOTION FOR SETTLEMENT APPROVAL PAGE - 1 Dockets.Justia.com 1 Engelland’s objections thereto. (Id. at 5-8.) The Court found that it needed more information to 2 determine whether the settlement was fair and reasonable. (Id. at 6.) The Court directed the 3 Settlement Parties to: (1) produce evidence of Cobalt’s financial condition; (2) show why 4 additional claims were not pursued against potentially liable corporate officers in this case; 5 (3) explain the parties’ basis for calculating the recovery period and statute of limitations; and 6 (4) show why additional or liquidated damages were not pursued. (Id. at 8.) 7 II. DISCUSSION 8 A. 9 In reviewing a proposed collective action settlement under the Fair Labor Standards Act Standard of Review 10 (FLSA), “a district court must determine whether the settlement represents a ‘fair and reasonable 11 resolution of a bona fide dispute.’” Selk v. Pioneers Memorial Healthcare Dist., __ F. Supp. 3d 12 __, 2016 WL 519088 at *3 (S.D. Cal. Jan. 29, 2016) (quoting Lynn’s Food Stores, Inc. v. United 13 States, 679 F.2d 1350, 1355 (11th Cir. 1982)). “If the settlement reflects a reasonable 14 compromise over issues that are actually in dispute, the Court may approve the settlement ‘in 15 order to promote the policy of encouraging settlement of litigation.’” McKeen-Chaplin v. 16 Franklin Am. Mortg. Co., 2012 WL 6629608 at *2 (N.D. Cal. Dec. 19, 2012) (quoting Lynn’s, 17 679 F.2d at 1354). The Court considers factors such as the risk, expense, complexity, and likely 18 duration of litigation; the amount offered in settlement; the extent of discovery completed and 19 the stage of the proceedings; and the reaction of putative members to the proposed settlement. 20 Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1988). 21 B. Analysis 22 The Court first addresses the supplemental briefing on the issues requested. 23 Cobalt’s Financial Status: In November 2014, Cobalt was substantially acquired by 24 Caliber Home Loans. (Dkt. No. 36 at 8; Dkt. No. 38 at 2.) Cobalt is now “in wind-down mode 25 and no longer generating new loans with a revenue stream.” (Dkt. No. 36 at 8-9.) Cobalt 26 submitted a balance sheet showing that, as of March 2016, its total equity was $5,154,501.21. ORDER GRANTING SECOND MOTION FOR SETTLEMENT APPROVAL PAGE - 2 1 (Dkt. No. 37-2 at 3.) This is more than sufficient to cover the settlement amount. 2 Liability of Corporate Officers: Corporate officers who have supervisory power over the 3 employer’s operations may be held jointly and severally liable for the employer’s failure to pay 4 employees consistent with the FLSA. Boucher v. Shaw, 572 F.3d 1087, 1094 (9th Cir. 2009). 5 The Settlement Parties acknowledge that certain corporate officers could be held liable for 6 Cobalt’s alleged failure to sufficiently compensate employees, but that those officers have not 7 been named as defendants in the settlement. (Dkt. No. 36 at 6.) The Settlement Parties agreed to 8 release any claims against these officers because Cobalt’s bylaws indemnify them and because 9 Cobalt’s finances are sufficient to cover the settlement amount. (Id.) 10 Engelland argues that Plaintiffs would have been in a stronger bargaining position if they 11 had named the officers as individual defendants. (Dkt. No. 40 at 6.) Ultimately, though, the 12 Court is unconvinced that the failure to join these officers renders the agreement unfair or 13 unreasonable. Cobalt has more than enough funds to cover the proposed settlement amount. 14 Recovery Period/Statute of Limitations: The FLSA has a two-year statute of limitations 15 unless the employer’s violation was “willful,” in which case the statute of limitations is extended 16 to three years. 29 U.S.C. § 255(a); Flores v. City of San Gabriel, __ F.3d __, 2016 WL 3090782 17 at *11 (9th Cir. June 2, 2016). Plaintiffs initially demanded that Cobalt toll the statute of 18 limitations, arguing that they should have been included in the Wheeler action. (Dkt. No. 36 at 9; 19 Dkt. No. 1 at 3.) Cobalt disputed this, noting the differing job duties and compensation models 20 for the positions at issue. (Dkt. No. 36 at 9.) Cobalt also maintained that a two-year statute of 21 limitations should apply, because there was evidence it did not act willfully. (Id.) In the end, the 22 parties reached a compromise of a three-year statute of limitations running from March 1, 2016. 23 (Id. at 10.) This recovery period covers claims for hours worked between March 1, 2013 and 24 November 4, 2014, when Cobalt ceased operations. (See Dkt. No. 3-1 at 22.) 25 Engelland argues that the proposed settlement waives a year of the statute of limitations 26 for Washington Production Partners, given that the statute of limitations period in the Bell-Beals ORDER GRANTING SECOND MOTION FOR SETTLEMENT APPROVAL PAGE - 3 1 suit was tolled and stretches back to March 17, 2012. (Dkt. No. 40 at 8.) But, this alone is not a 2 reason to discount the Grewe agreement, especially because Washington Production Partners can 3 choose to participate in the Bell-Beals suit instead. 2 Moreover, the Grewe agreement has clear 4 indications of compromise. For example, the end date of the recovery period is nearly two 5 months prior to this suit’s commencement, making those additional months available for claimed 6 overtime. (See Dkt. No. 1.) And, Cobalt agreed to a three-year period, the longer of the two 7 available under the FLSA. This limitations period is not unreasonable or unfair. 8 Liquidated Damages: 29 U.S.C. § 216(b) provides that an employer who violates the 9 FLSA shall be liable for unpaid overtime compensation, plus an additional equal amount as 10 liquidated damages. Liquidated damages are not automatic, though. Local 246 Util. Workers 11 Union v. Southern Cal. Edison Co., 83 F.3d 292, 297 (9th Cir. 1996). If an employer shows that 12 the failure to pay appropriate wages was in good faith and that the employer had reasonable 13 grounds for believing the failure was not an FLSA violation, the Court has discretion to deny an 14 award of liquidated damages. 29 U.S.C. § 260; see also Local 246, 83 F.3d at 29. 15 Here, Plaintiffs waived liquidated damages as to their claims for overtime hours that were 16 not recorded. (Dkt. No. 43 at 5.) The Settlement Parties maintain that this is fair and reasonable 17 based on Cobalt’s defense that failing to record such time violated company policy. (See Dkt. 18 No. 43 at 5-6; Dkt. No. 25 at 2, 6-7; Dkt. No. 27 at 2). 19 Engelland argues that, under Brooklyn Savings Bank v. O’Neil, 324 U.S. 697, 707 (1946), 20 employees may not waive liquidated damages in the interest of achieving a settlement. (Dkt. No. 21 40 at 2.) However, an employee “may settle and waive claims under the FLSA if the parties 22 present to a district court a proposed settlement agreement, and the district court enters a 23 24 25 26 2 The Court acknowledges Engelland’s concerns that the proposed notice letter does not make this distinction clear; this issue will be addressed below. ORDER GRANTING SECOND MOTION FOR SETTLEMENT APPROVAL PAGE - 4 1 judgment approving the settlement.” 3 McKeen-Chaplin v. Franklin Am. Mortg. Co., 2012 WL 2 6629608 at *2 (N.D. Cal. Dec. 19, 2012) (citing Lynn’s, 679 F.2d at 1354-55). Thus, the question 3 is whether the settlement, including the waiver, “reflects a reasonable compromise over issues 4 that are actually in dispute.” McKeen-Chaplin, 2012 WL 6629608 at *2. 5 Fairness and Reasonableness of Settlement: Accordingly, the Court now turns to the 6 question of whether the proposed settlement is fair and reasonable. There are certain 7 considerations the Court keeps in mind when addressing this question. 8 First, the Ninth Circuit rejects the argument that a court must “specifically weigh[] the merits 9 of the class’s claim against the settlement amount and quantif[y] the expected value of fully litigating 10 the matter.” Rodriguez v. West Publishing Corp., 563 F.3d 948, 965 (9th Cir. 2009). 11 12 13 14 15 16 17 [T]he court’s intrusion upon what is otherwise a private consensual agreement negotiated between the parties to a lawsuit must be limited to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable and adequate to all concerned. Therefore, the settlement or fairness hearing is not to be turned into a trial or rehearsal for trial on the merits. Neither the trial court nor this court is to reach any ultimate conclusions on the contested issues of fact and law which underlie the merits of the dispute, for it is the very uncertainty of outcome in litigation and avoidance of wasteful and expensive litigation that induce consensual settlements. The proposed settlement is not to be judged against a hypothetical or speculative measure of what might have been achieved by the negotiators. 18 Officers for Justice v. Civil Serv. Comm’n of City and County of San Francisco, 688 F.2d 615, 19 625 (9th Cir. 1982). Rather, the court should “put a good deal of stock in the product of an arms20 length, non-collusive, negotiated resolution.” Rodriguez, 563 F.3d at 965; see also In re Immune 21 22 3 Although the Lynn’s test has not been formally adopted by the Ninth Circuit, many 23 district courts in this circuit have applied it. See, e.g., Gonzalez-Rodriguez v. Mariana’s Enterps., 2016 WL 3869870 at *2 (D. Nev. July 14, 2016); Gamble v. Boyd Gaming Corp., 2015 WL 24 4874276 at *4 (D. Nev. Aug. 13, 2015); Deane v. Fastenal Co., 2013 U.S. Dist. LEXIS 163330 25 at *6 (N.D. Cal. Nov. 14, 2013); Trinh v. JPMorgan Chase & Co., 2009 WL 532556 at *1 (S.D. Cal. Mar. 3, 2009); Goudie v. Cable Commc’ns, Inc., 2009 WL 88336 at *1 (D. Or. Jan. 12, 26 2009); Thornton v. Solutionone Cleaning Concepts. Inc., 2007 WL 210586 at *3 (E.D. Cal. Jan. 26, 2007). ORDER GRANTING SECOND MOTION FOR SETTLEMENT APPROVAL PAGE - 5 1 Response Sec. Litig., 497 F. Supp. 2d 1166, 1171 (S.D. Cal. 2007) (where the parties participated in 2 voluntary mediation before an experienced mediator and “reached an agreement-in-principle to settle 3 the claims in the litigation,” such negotiations are “highly indicative of fairness”). “Ultimately, 4 [when evaluating a proposed settlement,] the district court’s determination is nothing more than 5 an amalgam of delicate balancing, gross approximations and rough justice.” Officers for Justice, 6 688 F.2d at 625 (internal quotations omitted). 7 In addition, where the Court evaluates an FLSA collective action settlement, the standard is 8 less exacting than when evaluating a Rule 23 class action settlement. Davis v. J.P. Morgan Chase & 9 Co., 775. F. Supp. 2d 601, 604-05 (W.D.N.Y. 2011). This is because Rule 23 settlements bind all 10 class members except those who affirmatively opt out, thus presenting the risk that a settlement will 11 unknowingly bind individuals. Id. In contrast, an FLSA settlement binds only those who 12 affirmatively opt in. Id. 13 With these principles in mind, the Court finds that the amount of $650,000 reflects a fair 14 and reasonable amount for the 427 putative class members. Engelland objects that the settlement 15 is unconscionably low, alleging that it provides only a tiny percentage of the potential amount 16 owed. (Dkt. No. 15 at 6.) This calculation is based on Engelland’s estimate of his own overtime 17 worked and average hourly wage. (Id.) In response, however, Cobalt produced evidence that, for 18 most employees, the potential amount owed is much closer to the settlement amount. (See Dkt. 19 No. 22 at 10-11; Dkt. No. 6-2 at 2-3; Dkt. No. 24 at 2-4.) Cobalt based this estimate on 20 Plaintiffs’ counsel’s interviews of several dozen putative members and Cobalt’s expert’s analysis 21 of relevant payroll records. (Id.) This evidence allays the concern that the Grewe collective 22 action members would be wildly undercompensated. While Engelland may not feel that the 23 settlement amount adequately compensates him, he is not bound by the amount and he has not 24 shown that it is appropriate for the Court to “intru[de] upon what is otherwise a private consensual 25 agreement.” Officers of Justice, 688 F.2d at 625. “[I]t must not be overlooked that voluntary 26 conciliation and settlement are the preferred means of dispute resolution.” Id. Here, the parties ORDER GRANTING SECOND MOTION FOR SETTLEMENT APPROVAL PAGE - 6 1 voluntarily came to a fair and reasonable agreement, 4 one that Engelland is free to reject. 2 Notice Letter: Finally, the Court addresses the issue of the proposed notice letter. The 3 Court expressed concern that the letter was misleading, 5 and the Settlement Parties agreed to 4 accept revisions. (Dkt. No. 31 at 7-8; Dkt. No. 43 at 9.) The Court makes three amendments to 5 the letter. First, the letter must clearly explain the options available to putative members, 6 including: the differences between the Grewe settlement and the Bell-Beals suit, such as the 7 difference in recovery periods; the estimated recovery amount per member in the Grewe suit; and 8 the putative members’ right to opt into this suit, the Bell-Beals suit (if applicable), or neither. 9 Second, while the letter may explain the benefits of opting in (e.g., avoiding the uncertainty of 10 litigation), it shall contain no language encouraging any putative member to do so. Finally, the 11 letter may not misrepresent Cobalt’s position on its acceptance of liability. For example, Cobalt 12 may state that it denies any intentional violations of the FLSA, or it may remain silent on the 13 question of liability. However, Cobalt may not state that it “vigorously denies” all allegations in 14 the Grewe claim. (See Dkt. No. 41 at 4-9.) 15 III. CONCLUSION 16 For the foregoing reasons, the second motion for settlement approval (Dkt. No. 36) is 17 GRANTED. The settlement, including the attorney fee request, is hereby APPROVED. 18 // 19 // 20 // 21 // 22 // 23 24 4 Not only have Plaintiffs in this case deemed this settlement agreement acceptable, but more than 200 members accepted a similar agreement in Wheeler. (See Dkt. No. 23 at 3-4.) 5 The Court notes the praecipe at Docket Number 29and understands that the final notice 26 letter will include the corrected language. 25 ORDER GRANTING SECOND MOTION FOR SETTLEMENT APPROVAL PAGE - 7 1 DATED this 27th day of July 2016. 2 3 4 A 5 6 7 John C. Coughenour UNITED STATES DISTRICT JUDGE 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 ORDER GRANTING SECOND MOTION FOR SETTLEMENT APPROVAL PAGE - 8
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