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Kuntze v. Josh Enterprises, Inc.

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

May 20, 2019

SUZANNE KUNTZE, Plaintiff,
v.
JOSH ENTERPRISES, INC., d/b/a, JACKSON HEWITT TAX SERVICE, Defendant.

          MEMORANDUM OPINION

          MARK S. DAVIS CHIEF UNITED STATES DISTRICT JUDGE.

         The parties have submitted a Joint Motion for Approval of Settlement and Dismissal, ECF No. 26, along with a copy of the Settlement Agreement, ECF No. 26-2, and a joint memorandum in support, ECF No. 27, seeking dismissal with prejudice of this action filed pursuant to the Fair Labor Standards Act (''FLSA"), 29 U.S.C. § 201, et seq. For the reasons stated below, the Court DENIES the motion for settlement approval without prejudice.

         I. STANDARD

         "Congress made the FLSA's provisions mandatory; thus, the provisions are not subject to negotiation or bargaining between employers and employees. FLSA rights cannot be abridged by contract or otherwise waived because this would nullify the purposes of the statute and thwart the legislative policies it was designed to effectuate." Lynn's Food Stores, 679 F.2d at 1352 (internal quotation marks and citations omitted). As a result, ''[t]here are only two ways in which back wage claims arising under the FLSA can be settled or compromised by employees." Id. Back wage claims under the FLSA may be settled only (1) by a payment of unpaid wages supervised by the Department of Labor, or (2) by a "stipulated judgment" entered by a court. Id. at 1355. If the stipulated judgment proposed by the parties reflects "resolution of a bona fide dispute' id., and is "a reasonable compromise over [the] issues," the court may approve it "in order to promote the policy of encouraging settlement of litigation," id. at 1354.

         Thus, a district court must first assess whether "there are FLSA issues that are 'actually in dispute. "' Saman v. LBDP, Inc., No. CIV.A. DKC 12-1083, 2013 U.S. Dist. LEXIS 83414, at *7(D. Md. 2013) (quoting Lane v. Ko-Me, LLC, No. DKC-10-2261, 2011 U.S. Dist. LEXIS 97870, at *3 (D. Md. 2011)). Next, the district court must determine whether the settlement is "a reasonable compromise over [the] issues." Lynn's Food Stores, 679 F.2d at 1354. While the United States Court of Appeals for the Fourth Circuit has not squarely addressed the factors to be considered in determining a "reasonable compromise" in an FLSA settlement, district courts usually consider the following:

(1) the extent of discovery that has taken place; (2) the stage of the proceedings, including the complexity, expense and likely duration of the litigation; (3) the absence of fraud or collusion in the settlement; (4) the experience of counsel who have represented the plaintiffs; (5) the opinions of [] counsel ...; and (6) the probability of plaintiffs' success on the merits and the amount of the settlement in relation to the potential recovery.

Saman, 2013 U.S. Dist. LEXIS 83414, at *7-8 (quoting Lomascolo v. Parsons Brinckerhoff, Inc., No. 1:08-cv-1310, 2009 U.S. Dist. LEXIS 89136, at *29 (E.D. Va. June 23, 2009), report and recommendation adopted by Lomascolo v. Parsons Brinckerhoff, Inc., No. 1:08-cv-1310, 2019 U.S. Dist. LEXIS 89129, at *5 (E.D. Va. Sept. 28, 2009)) (internal quotation marks omitted) (alterations in original). "Finally, where a proposed settlement of FLSA claims includes a provision regarding attorneys' fees, the reasonableness of the award must also 'be independently assessed, regardless of whether there is any suggestion that a conflict of interest taints the amount the wronged employee recovers under a settlement agreement.'" Id. (quoting Ko-Me, LLC, 2011 U.S. Dist. LEXIS 97870, at *7).

         II. ANALYSIS

         A. FLSA Issues Actually in Dispute

         To determine whether there is an actual dispute about Defendant's liability under the FLSA, the Court may examine the pleadings as well as the representations made in the Settlement Agreement. Duprey v. Scotts Co. LLC, 30 F.Supp.3d 404, 408 (D. Md. 2014). It is clear from the pleadings as well as the instant motion that there are several FLSA issues in dispute in this case: (1) Plaintiff claims she was misclassified as exempt from overtime but Defendant maintains that she was properly classified, (2) Plaintiff claims she is owed a time and a half rate for her overtime hours whereas Defendant claims she should be compensated under the half-time rate of the fluctuating workweek method, and (3) Plaintiff claims that the misclassification was willful and Defendant maintains that it was not. Joint Memo 4, ECF No. 27. Moreover, this Court is confident that a bona fide FLSA dispute exists because, prior to the instant motion being filed, it conducted a hearing and issued an opinion on Defendant's motion to dismiss that analyzes such disputes in detail. Opinion and Order, ECF No. 23. Accordingly, the Court finds that an actual dispute exists as to Plaintiff's FLSA claims.

         B. Fairness and Reasonableness

         As noted above, the Court should consider several factors in deciding whether the settlement is fair and reasonable, including:

(1) the extent of discovery that has taken place; (2) the stage of the proceedings, including the complexity, expense and likely duration of the litigation; (3) the absence of fraud or collusion in the settlement; (4) the experience of counsel who have represented the plaintiffs; (5) the opinions of [] counsel ...; and (6) the probability of plaintiffs' success on the merits and the amount of the settlement in relation to the potential recovery.

Saman, 2013 U.S. Dist. LEXIS 83414, at *8 (quoting Lomascolo, 2009 U.S. Dist. LEXIS 89136, at *29) (internal quotation marks omitted) (alterations in original). The proposed settlement amount for back wages and liquidated damages, as stated in the Settlement Agreement, is $14, 868, which is approximately 57% of the amount that Plaintiff would have been entitled to recover were she to prevail on ...


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