Douglas v. Allied Universal Sec. Servs.
Douglas v. Allied Universal Sec. Servs.
Opinion of the Court
The parties have moved for reconsideration of the Court's prior decision declining to grant preliminary approval of their proposed class and collective action settlement. The motion for reconsideration contends that the Court's conclusion-finding that the proposed settlement was structurally incompatible with Cheeks and Section 216(b) of FLSA-rested on "overlooked facts and misapplied legal precedents." (Mem. of Law in Supp. of Joint Mot., attached as Ex. 1 to Joint Mot. for Reconsideration, Dkt. No. 45 ("Joint Mem.") at 1). It did not. The motion for reconsideration is denied.
The problems with the parties' collective action settlement are manifold. Under the settlement proposed, a putative FLSA collective member receives a settlement check and opts into the collective by endorsing and cashing that check. The proposed settlement also has plaintiffs opting into the collective after the final fairness hearing and asks the Court to dismiss with prejudice the claims of collective members at the fairness hearing-and therefore before they opt in. See Douglas v. Allied Universal Sec. Servs. , No. 17-CV-6093,
The parties have offered a number of different justifications for this arrangement, ranging from assertions that the Court misapprehended the settlement to a plea that the Court simply follow along with what other courts have done. These arguments fall apart when analyzed with any scrutiny:
1. The parties contend that the Court erred by relying on Xiao Ling Chen v. XpresSpa at Terminal 4 JFK LLC , a case that also rejected a similar collective action settlement. (See Joint Mem. at 4-6 (citing No. 15-CV-1347,
The notice to collective members does not solve the structural problems with the settlement. A putative collective action member cannot object to the FLSA settlement-even at the final hearing-because they have not yet opted into the case. They only opt into the case when they endorse the settlement check, which the employee receives after the hearing is held.
It is stunning for the parties to take this position regarding notice, given their initial submissions to the Court. The initial notice was for a "Proposed Class Action Lawsuit Settlement and Final Fairness Hearing;" there was barely any mention of the collective action component or the fact that an objection to the collective action could be heard at the fairness hearing. (See generally Notice of Proposed Class Action, attached as Ex. 1 to Settlement Agreement, attached as Ex. 1 to Decl. of Christopher Q. Davis, Dkt. No. 34). The objection section of the notice only stated "[i]f you choose to stay in the class , you can tell the Court that you don't agree with the settlement or some part of it. This is called objecting to the settlement. The Court will consider your views." (Id. at 8 (emphasis added)). In other words, the parties did not behave as if the final hearing was one where collective action members could be heard. And they still do not. The current revised notice does not state anywhere that someone who opposes the collective may be heard on such objections. The same language about objections from the original notice remains. (See Am. Class/Collective Notice, attached as Ex. 1 to Letter dated Feb. 18, 2019, Dkt. No. 41 at 9). There is no mention in the notice of an ability to object to the collective action.
The argument that the Xiao Ling Chen settlement would have been approved-if the court had a more robust notice, akin to the one in this case-is pure conjecture. Nothing in Xiao Ling Chen says that. The argument also ignores the fundamental problem that Judge Pollak had with the settlement, which is that it had the court disposing, with prejudice, of claims of collective action members before they appeared. When employees opted into the collective, their claims had already been dismissed. That created a double incongruity: the Court dismissing claims of individuals not before it, and then employees opting into an action to assert and settle claims they no longer have. See Xiao Ling Chen ,
The same incongruity is present here. This is no surprise since the settlement structure in Xiao Ling Chen is substantively identical to the one proffered here. (Compare Settlement Agreement, attached as Ex. 1 to Decl. of Christopher Q. Davis, Dkt. No. 34 ("Douglas Settlement Agreement") ¶¶ 2.3, 3.9, 4.4 (providing that employees can opt into the FLSA collective by cashing the settlement check, which would be mailed after the final fairness hearing and order of dismissal), with Settlement Agreement, attached as Ex. 1 to Decl. of C.K. Lee, No. 15-CV-1347, Dkt. No. 85 ("Xiao Ling Chen Settlement Agreement") ¶¶ 3.7, 3.9, 5.1 (same)). Xiao Ling Chen is hardly inapposite.
2. Spending their time on Xiao Ling Chen, the parties fail to address the double incongruity identified by the Court in its prior Order, and the fact that the proffered settlement is incompatible with Cheeks :
The proffered structure has the Court opining on the fairness of a settlement-that is not a class action-of employees who are not before the Court and dismissing their claims with prejudice before they ever appear. If the Court did so, then recipients of the settlement checks would have not litigation to opt in to. The procedure set forth in the Agreement-namely that an individual opts in and simultaneously settles his or her claim by depositing a check-simply makes no sense in the context of Cheeks . Most importantly, however, this framework releases a claimant's FLSA claims without consent and creates the possibility that, should a claimant decline to join the FLSA settlement by failing to cash the check, he or she would neither have the benefit of the settlement nor the ability to bring ... a FLSA action . This would give the employee effectively no alternative but to accept the check, a Hobson's choice that Cheeks and a true opt-in process is intended to avoid.
Douglas ,
Even accepting that a coerced choice is still a choice, the Court's other concerns are not alleviated by the fact that only those who cash checks waive FLSA claims. There remains the issue that the Court is opining on the fairness of a settlement and dismissing the FLSA claims with prejudice before such parties are before the Court. As a technical matter, the Court's dismissal becomes effective upon cashing of the settlement check. But because the final fairness hearing takes place before the checks are mailed, the Court orders the dismissal prior to the employee's appearance in the case. That means that an employee has no opportunity whatsoever to come before the Court, to object or otherwise be heard, or for the Court to hear from the employee should the need arise. The Court would conduct a Cheeks fairness review-to determine whether the employer has overreached in obtaining a settlement from the employee under dubious circumstances-without the employee present. See Douglas ,
3. The parties' attempted fix to the settlement demonstrates their lack of appreciation of the Cheeks problem or the problem with the Court opining on claims and parties not before it. The prior Order noted that a FLSA collective action cannot proceed if the consents to join are not filed with the Court. See Douglas ,
The parties also cite to Shahriar v. Smith & Wollensky Restaurant Group, Inc. to argue that Rule 23 controls "in hybrid class/collective actions because it is more favorable to plaintiff-employees" and thus plaintiffs can release FLSA claims by endorsing a check, without Section 216(b)'s consent to join requirement. (Joint Mem. at 8 (citing
4. The parties then suggest the Court should accept the proposed structure because a number of other courts in this District have done so. (See Joint Mem. at 10-11 (citing 15 cases that allegedly "utilize[e] the very same check cashing opt-in mechanism the parties propose here")). This sub silentio practice does not make the structure sound. Of the 15 cases cited, five involved preliminary court approval using the parties' proposed orders, (see, e.g., Gittens v. 7-Eleven, Inc. , No. 17-CV-6378, Order dated July 31, 2018, Dkt. No. 29), and eight involved preliminary court approval with little or no explanation, (see, e.g., Cano v. Nineteen Twenty Four, Inc. , No. 15-CV-4082, Order dated Dec. 30, 2016). And none of the cases addressed the problems identified by this Court's prior Order. "While the ultimate result in these cases is an approval of a release regime mirroring the one proposed ..., none of these courts addressed the [Court's] concerns." Sharobiem ,
The cases are also distinguishable. For example, in Bijoux v. Amerigroup N.Y., LLC , the parties defined FLSA class members as those "who filed Consent to Join Forms with the Court on or before the complete execution of this Agreement ." (Settlement Agreement, attached as Ex. A to Decl. of Rachel Bien, No. 14-CV-3891, Dkt. No. 74 ("Bijoux Settlement Agreement") ¶ 2.8 (emphasis added)). And several plaintiffs in that case did so. (See Consents to Become Party in a Collective Action, No. 14-CV-3891, Dkt. Nos. 5-11, 14, 28-29, 48-49, 51, 53-54, 62, 65-66, 68).
The motion for reconsideration is denied. Any revised settlement agreement must be provided by June 20, 2019 .
SO ORDERED.
Plaintiffs in at least two other cases cited also filed consents on the docket before any motion for preliminary settlement approval was submitted. (See Drouillard v. Sprint Corp , No. 16-CV-624, Consents to Become Party in a Collective Action, Dkt. Nos. 14, 27-28, 32-37, 44-45, 51-52, 56-104; Parsley v. Broadhollow Hospitality LLC , No. 17-CV-97, Consents to Become Party in a Collective Action, Dkt. Nos. 3-4, 10, 23-30, 33).
Reference
- Full Case Name
- Kirk DOUGLAS, individually and on behalf of all others similarly situated v. ALLIED UNIVERSAL SECURITY SERVICES, Allied Barton Security Services LLC, Allied Security Holdings LLC
- Cited By
- 10 cases
- Status
- Published