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Hatzey v. Divurgent, LLC

United States District Court, E.D. Virginia, Norfolk Division

October 9, 2018

ALEXANDER HATZEY, individually and on behalf of all others similarly situated Plaintiff,
v.
DIVURGENT, LLC, Defendant.

          REPORT AND RECOMMENDATION

          Lawrence R. Leonard United States Magistrate Judge

         Before the Court is Plaintiffs Unopposed Motion for Settlement Approval and associated memorandum, ECF Nos. 32-33, which were filed in accordance with the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201, et seq. These matters were referred to the undersigned United States Magistrate Judge for a report and recommendation pursuant to a Referral Order from the United States District Judge. ECF No. 28; see also 28 U.S.C. §§ 636(b)(1)(B); Fed.R.Civ.P. 72(b); E.D. Va. Local Civ. R. 72. For the following reasons, the undersigned RECOMMENDS that Plaintiffs Unopposed Motion for Settlement, ECF No. 32, be GRANTED.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         Plaintiff Alexander Hatzey ("Hatzey") worked for Defendant Divurgent, LLC, ("Divurgent") as a consultant providing support and training for use of new recordkeeping systems to Divurgent clients at Lahey Medical Center in Boston, Massachusetts, between March 2015 and September 2015. ECF No. 1 at ¶¶ 12-14. Divurgent is a corporation that offers information technology education services for the healthcare industry and maintains its headquarters in Virginia Beach, Virginia. Id. at ¶ 5. During the period he worked for Defendant at Lahey Medical Center, Plaintiff was classified as an independent contractor. Id. at ¶¶ 8-9. Hatzey was paid solely on an hourly basis, paid only for time he actually worked, and was not paid overtime. Id. at ¶ 15. Others similarly situated to Plaintiff worked for Divurgent providing the same or similar training and support to medical facilities across the United States for new electronic recordkeeping systems. Id. at ¶ 12. These individuals were also classified as independent contractors. Id. at ¶ 16.

         Plaintiff filed a Complaint, ECF No. 1, on April 10, 2018, for a collective class action within which Plaintiff alleges Hatzey, and all those similarly situated (hereinafter "FLSA Collective Members" or "Members") were improperly classified as independent contractors, rather than employees of Divurgent, and were not exempt from the FLSA. Id. at ¶¶ 16, 28-36. The Complaint further alleged that, because the Members were improperly classified as independent contractors, they did not receive overtime pay for hours worked in excess of forty hours per week to which they were entitled. Id. at 1. Divurgent filed an Answer to Plaintiffs Complaint on May 22, 2018. ECF No. 22. On June 6, 2018, the parties filed a Stipulation to Stay Litigation for ADR and Tolling Agreement, ECF No. 24, and the Court entered a Stipulation and Order to Stay Litigation for ADR and Tolling Agreement, ECF No. 25, on July 13, 2018. The case was stayed until August 10, 2018, at which time Plaintiff filed a Motion for Settlement Approval with an accompanying memorandum, ECF Nos. 32-33. The Motion was referred to the undersigned for a report and recommendation by the United States District Judge on August 13, 2018.

         According to the proposed Settlement Agreement, ECF No. 33, attach. 1, Defendant agreed to pay a total amount of $2, 450, 000.00 ("Gross Settlement Amount") to settle this action. In exchange, the named Plaintiff and all participating Members agree to release their claims against Divurgent. Id. Under the Agreement Hatzey is to receive $10, 000.00 for his efforts in bringing and prosecuting the matter, Plaintiffs counsel will receive $816, 666.67, which is one-third of the Gross Settlement Amount, and Plaintiffs counsel shall be reimbursed for out-of-pocket costs not to exceed $40, 000.00.[1] Id. at 6, attach. 1. The remaining amount ("Net Settlement Amount'*) of money is to be divided among the Members proportionate to the number of unpaid hours of overtime worked by each Member. Id. at 3, 6. Members will receive a notice of settlement and a check in an amount proportionate to the number of overtime hours unpaid to that Member during the relevant period. Id. Each Member must cash his or her check within 180 days to participate in the settlement and release his or her claim against Divurgent. Id. Those Members who do not cash their checks will not release their claims against Divurgent. Id. At the end of the 180-day period, if the amount of uncashed checks exceeds $50, 000.00, any money left over due to uncashed checks will be redistributed among the participating Members on a pro rata basis. Id. at 4. If the uncashed amount is less than $50, 000.00, that amount will be donated to Public Justice, a legal non-profit. Id. If all 1, 065 Members participate, the average payment will be $1, 486.70. Id. at 7.

         The Court held a hearing on Plaintiffs Motion for Settlement Approval on August 30, 2018. ECF No. 39. At the hearing, Carey Nash and Harold Lichten appeared on behalf of the Plaintiff and Laura Windsor appeared on behalf of the Defendant. As such, the Motion, ECF No. 32, is now ripe for recommended disposition.

         II. ANALYSIS

         All FLSA settlements must be approved either by the United States Department of Labor or the court. Taylor v. Progress Energy, Inc., 415 F.3d 364, 374 (4th Cir. 2005), reinstated on reh'g, 493 F.3d 454 (4th Cir. 2007), cert denied, 554 U.S. 909 (2008); Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350, 1353 (11th Cir. 1982); Lomascolo v. Parson Brinckerhoff, Inc., 2009 WL 3094955 at *8 (E.D. Va. 2009). Such approval is required for both class actions and individual cases. See Poulin v. Gen. Dynamics Shared Res., Inc., 2010 WL 1813497 at *1 (W.D. Va. 2010). "A proposed settlement should be approved if it reflects a reasonable compromise over issues actually in dispute." Galvez v. Americlean Servs. Corp., 2012 WL 1715689 at *2 (E.D. Va. 2012). At the settlement hearing, "a court's role is... a balancing of likelihoods rather than an actual determination of the facts and law in passing upon whether the proposed settlement is fair, reasonable, and adequate." Lomascolo, 2009 WL 3094955 at *10 (citation omitted). "In addition to being fair and reasonable, in order to merit Court approval, the settlement must resolve a bona fide dispute over FLSA provisions." Id. at *16.

         Factors the court weighs when considering approval of a FLSA settlement agreement for a class action include: (1) the extent of discovery conducted; (2) the stage of the proceedings; (3) the absence of fraud or collusion in the settlement; (4) the experience of counsel who have represented the Plaintiffs; (5) the opinions of class counsel and class members; and (6) the amount of settlement in relation to the potential recovery. In re Jiffy Lube Sec. Litig., 927 F.2d 155, 158-59 (4th Cir. 1991); Flinn v. FMC Corp., 528 F.2d 1169, 1173-74 (4th Cir. 1975); Lomascolo, 2009 WL 3094955 at *11-16 (listing the factors in headings); see also Patel v. Barot, 15 F.Supp.3d 648, 656 (E.D. Va. 2014) (listing similar factors for non-class action FLSA settlement approvals). Analysis of these factors demonstrates that the proposed settlement is reasonable.

         Regarding the first factor, the parties reached a settlement agreement at the beginning stages of litigation. Despite the prompt settlement, however, Plaintiff claims the parties did engage in substantial discovery that included the production of payroll and timekeeping data for Plaintiff and all putative Members, and prepared detailed mediation statements and damages analyses. ECF No. 33 at 2; see In re Jiffy Lube Sec. Litig., 927 F.2d at 159 ("[A] reasonable judgment on the possible merits of the case is best achieved when all discovery has been completed and the case is ready for trial."). Plaintiff proffered at the August 30, 2018, hearing that this is one of several cases of its kind Plaintiffs counsel has handled, which aided the efficient discovery exchange and a prompt agreement to settlement.

         Second, because Plaintiffs counsel has expended a collective 250 hours of effort related to the instant case and the parties are still in the early stages of the proceedings, there would be significant additional expense to both Plaintiff and Defendant were this case to move forward to trial. ECF No. 33 at 17. Plaintiff stated several reasons why settlement, even at this early stage in the proceedings, is appropriate, referencing multiple hurdles that Plaintiff would face in moving litigation forward. These include complications associated with the statute of limitations, class certification, the merits of Plaintiffs claim, and the ability to recover. Id. at 5, 8, 12, 13. Particularly, Plaintiff argued that the Settlement Agreement accounts for 75% of unpaid wages owed based on a three-year, rather than two-year, limitations period (providing further that Plaintiff believes there is significant risk Plaintiff could not prove Defendant's conduct was willful, which is required to qualify for recovery under the three-year limitations period at trial, and further risk that Plaintiff may not recover at all). Id. at 5, 19. Related to class certification, Plaintiff contends, and Defendant concedes for settlement purposes, that the Members are similarly situated as each does essentially the same or very similar jobs, are subject to the same hours, and subject to the same pay schedule. Id. at 9-10. However, in reaching settlement, Plaintiff weighed risks of a contest of class certification, particularly considering the geographical spread of the Members, whose work is done across the United States. Id. at 12, 19.

         Third, there is neither evidence, nor even a suggestion, of any collusion on the part of the parties. The Settlement Agreement was reached through mediation conducted by the Honorable Diane M. Welsh, retired United States Magistrate Judge for the Eastern District of Pennsylvania, on July 2, 2018. Id. at 2; See Lomascolo, 2009 WL 3094955 at *12 (noting there is a presumption that no fraud or collusion occurred in the absence of any evidence to the contrary) (citing Camp v. Progressive Corp., 2004 WL 2149079 at *7 (E.D. La. 2004)).

         Fourth, Plaintiffs Counsel are experienced in FLSA cases, employment law, wage and hour disputes, and class actions. Notably, Plaintiffs counsel stated this is just one of several cases of its kind counsel has litigated. Counsel's opinions and evaluation of the reasonableness of the settlement and recommendation to accept the settlement is some evidence of the ...


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