United States District Court, E.D. Virginia, Norfolk Division
ALEXANDER HATZEY, individually and on behalf of all others similarly situated Plaintiff,
DIVURGENT, LLC, Defendant.
REPORT AND RECOMMENDATION
Lawrence R. Leonard United States Magistrate Judge
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.
FACTUAL AND PROCEDURAL BACKGROUND
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.
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
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. 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.
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
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.
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
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.
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.
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)).
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