Opinion
CIVIL ACTION NO. 1:19-CV-1093
02-07-2020
TRAVIS ATHERTON, Plaintiff v. TARGET CORPORATION, Defendant
There is a "strong presumption" in favor of keeping FLSA proceedings "unsealed and available for public view." Cuttic v. Crozer-Chester Med. Ctr., 868 F. Supp. 2d 464, 467 (E.D. Pa. 2012) (collecting cases). We previously granted the parties' joint motion to file their proposed settlement agreement under seal pending our review of its terms. (Doc. 5). Because we reject the settlement agreement in its current form, that document will remain under seal, and we will protectively seal any revised proposed settlement agreement while it is under review. However, because permanent sealing of a final settlement agreement would contravene the FLSA's objectives, any revised settlement agreement will be unsealed upon the court's approval. Mindful of the public right of access, we will file separately an unsealed version of this memorandum with settlement and attorneys' fees figures redacted.
Plaintiff Travis Atherton and defendant Target Corporation ("Target") jointly move the court to approve their settlement agreement. The parties seek to resolve Atherton's claims against Target under the Fair Labor Standards Act of 1938 ("FLSA"), 29 U.S.C. § 201 et seq., and the Pennsylvania Minimum Wage Act of 1968 ("PMWA"), 43 PA. STAT. AND CONS. STAT. ANN. § 333.101 et seq. After careful review of the proposed settlement, the court will grant in part and deny in part the parties' joint motion.
I. Factual Background & Procedural History
Target employed Atherton as a warehouse associate from August 2016 until approximately November 5, 2019. (Doc. 1 ¶ 23). Target considered Atherton to be "non-exempt" and subject to overtime compensation requirements under the FLSA and PMWA. (Id. ¶ 25). According to the complaint, Target improperly calculated Atherton's regular rate—the rate upon which his overtime pay was based—by failing to use a "weighted average" that included shift differentials, bonuses, and other additional remuneration. (Id. ¶¶ 28-30). Atherton also alleges that Target failed to include in his wages the time it took for him to walk from the time clocks, which are centrally located within Target's distribution centers, to security-screening locations near the distribution centers' exits. (Id. ¶¶ 37-42).
Atherton commenced this action by filing a putative class- and collective-action complaint on June 26, 2019. Atherton asserts violations of the FLSA (Count I) and the PMWA (Count II). Following settlement negotiations, the parties filed the instant joint motion for approval of their proposed settlement agreement, along with a sealed copy of the agreement for the court's review.
II. Legal Standard
Congress enacted the FLSA to "protect all covered workers from substandard wages and oppressive working hours." Barrentine v. Ark.-Best Freight Sys., 450 U.S. 728, 739 (1981) (citing 29 U.S.C. § 202(a)). The statute was designed to ensure that each employee covered by the Act would receive "[a] fair day's pay for a fair day's work and would be protected from the evil of overwork as well as underpay." Id. (alteration in original) (internal quotation marks and citations omitted). To safeguard employee rights made mandatory by statute, a majority of courts have held that bona fide FLSA disputes over unpaid wages may be settled or compromised only through payments made under the supervision of the Secretary of the Department of Labor or by judicial approval of a proposed settlement in an FLSA lawsuit.
See, e.g., Lynn's Food Stores, Inc. v. United States ex rel. U.S. Dep't of Labor, 679 F.2d 1350, 1354-55 (11th Cir. 1982); Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199, 206 (2d Cir. 2015); Walton v. United Consumers Club, Inc., 786 F.2d 303, 305-07 (7th Cir. 1986); but see Martin v. Spring Break '83 Prods., L.L.C., 688 F.3d 247, 256 (5th Cir. 2012).
The Third Circuit has not addressed whether FLSA actions claiming unpaid wages may be settled privately prior to obtaining judicial approval. Absent such guidance, district courts within the Third Circuit have consistently adopted the majority view and have required judicial approval as a precondition to amicable resolution of claims. Courts typically employ the considerations set forth by the Eleventh Circuit in Lynn's Food Stores, 679 F.2d 1350, when evaluating proposed FLSA settlement agreements. See, e.g., Solkoff, 2020 WL 374582, at *2; Kraus, 155 F. Supp. 3d at 522; Potoski, 2020 WL 207061, at *2; Waltz, 2017 WL 2907217, at *2; Bettger, 2015 WL 279754, at *4; Brumley, 2012 WL 1019337, at *4.
See, e.g., Solkoff v. Pa. State Univ., No. 18-683, ___ F. Supp. 3d ___, 2020 WL 374582, at *2 (E.D. Pa. Jan. 23, 2020) (citing Howard v. Phila. Hous. Auth., 197 F. Supp. 3d 773, 776 (E.D. Pa. 2016)); Kraus v. PA Fit II, LLC, 155 F. Supp. 3d 516, 522 (E.D. Pa. 2016) (citing Adams v. Bayview Asset Mgmt., LLC, 11 F. Supp. 3d 474, 476 (E.D. Pa. 2014)); Potoski v. Wyoming Valley Health Care Sys., No. 3:11-CV-582, 2020 WL 207061, at *2 (M.D. Pa. Jan. 14, 2020) (citing Bettger v. Crossmark, Inc., No. 1:13-CV-2030, 2015 WL 279754, at *3 (M.D. Pa. Jan. 22, 2015)); Waltz v. Aveda Transp. & Energy Servs. Inc., No. 4:16-CV-469, 2017 WL 2907217, at *2 n.13 (M.D. Pa. July 7, 2017) (collecting cases); Green v. Ventnor Beauty Supply, Inc., No. 1:18-CV-15673, 2019 WL 2099821, at *1 (D.N.J. May 14, 2019) (citing Chillogallo v. John Doe LLC #1, No. 15-537, 2018 WL 4735737, at *1 (D.N.J. Oct. 1, 2018); Bettger, 2015 WL 279754, at *3; Brumley v. Camin Cargo Control, Inc., No. 08-1798, 2012 WL 1019337, at *1 (D.N.J. Mar. 26, 2012)). --------
Under Lynn's Food Stores, a proposed settlement will merit judicial approval if it is a "fair and reasonable resolution of a bona fide dispute over FLSA provisions." Lynn's Food Stores, 679 F.2d at 1355. When the reviewing court is satisfied that the agreement resolves a bona fide dispute, it proceeds in two phases: first, the court assesses whether the agreement is fair and reasonable to the plaintiff employee; and second, the court determines whether the settlement furthers or "impermissibly frustrates" implementation of the FLSA in the workplace. See Potoski, 2020 WL 207061, at *2; Waltz, 2017 WL 2907217, at *2; Kraus, 155 F. Supp. 3d at 522; Bettger, 2015 WL 279754, at *4; Brumley, 2012 WL 1019337, at *4.
III. Discussion
The court will consider seriatim the terms of the proposed settlement, the nature of the parties' dispute, and the fairness and reasonableness of the comprise as to Atherton and as measured against the intent of the FLSA. See Lynn's Food Stores, 679 F.2d at 1355.
A. Terms of Proposed Settlement
Under the terms of the proposed settlement, Target agrees to pay $ [Redacted] to resolve Atherton's claims. (Doc. 10, Ex. A ¶ 9). Atherton will receive $ [Redacted] of the total settlement amount, and his counsel will receive $ [Redacted] in attorney's fees, consistent with Atherton's representation agreement. (Id. ¶ 9(a)-(c); see Doc. 12-1 ¶ 16). In exchange for this payment, the proposed settlement obligates Atherton to withdraw his charge of discrimination filed with state and federal agencies and to dismiss the claims asserted in his case. (Doc. 10, Ex. A ¶¶ 1, 3). The proposed settlement agreement includes a specific release of any claims that Atherton could have asserted in his charge of discrimination or in this litigation. (Id. ¶ 4). It further includes a sweeping general release of virtually any other claim Atherton may have against Target, a covenant not to sue Target for any released claim, and a provision establishing Atherton's liability for Target's attorneys' fees and costs for any lawsuit filed in breach of the covenant. (Id. ¶¶ 5-6).
The agreement includes both a confidentiality clause and a non-disparagement clause. The confidentiality clause bars Atherton from disclosing the facts underlying this lawsuit, the terms or amount of the settlement, and any information about negotiations leading to the agreement to anyone except "his spouse, attorneys, tax advisor(s), or as required by law." (Id. ¶ 13). The clause requires Atherton to respond to any inquiries about this case by "simply stat[ing] that the matter has been resolved" without no other comment. (Id.) The non-disparagement clause prohibits Atherton from making statements or taking other actions "that disparage or reflect negatively on" Target. (Id. ¶ 12).
B. Bona Fide Dispute
We first address the threshold question of whether the proposed settlement resolves a bona fide dispute between the parties. Atherton alleges that Target willfully violated state and federal law. (See Doc. 1 ¶¶ 44-58). Specifically, Atherton claims that Target improperly calculated the regular rate on which his overtime pay was based and that Target failed to include in his wages the time it took to walk from time clocks to security-screening locations near the exits of its distribution centers. (Id. ¶¶ 28-30, 37-42). The parties settled this case before Target filed an answer, but Atherton's counsel indicates in his declaration that Target denies Atherton's allegations. (Doc. 12-1 ¶ 10). After Atherton filed his complaint, the parties engaged in good-faith, arms-length negotiations, ultimately producing the proposed settlement presently under review. (Id. ¶ 11).
A bona fide dispute exists when parties genuinely disagree about the merits of an FLSA claim—when there is factual rather than legal doubt about whether the plaintiff would succeed at trial. See Lynn's Food Stores, 679 F.2d at 1354; Waltz, 2017 WL 2907217, *2; Kraus, 155 F. Supp. 3d at 530. An agreement settling FLSA claims must not amount to a "mere waiver of [an employee's] statutory rights," but rather must "reflect a reasonable compromise" of genuinely disputed factual issues. Lynn's Food Stores, 679 F.2d at 1354.
The record provides the court a limited basis from which to test whether the parties' proposed settlement agreement resolves a bona fide dispute. Our only understanding of the parties' respective positions comes from Atherton's complaint and from settlement documents indicating that Target "denies all of [Atherton's] allegations and claims." (Doc. 10, Ex. A at 1; see also Doc. 12-1 ¶ 10). Nonetheless, we can glean from the record that Target disputes the factual allegations supporting Atherton's complaint and that Atherton's counsel believes that proceeding to trial in view of Target's "various defenses to its liability" would present a degree of risk. (See Doc. 12-1 ¶ 15). We find that the proposed settlement resolves a bona fide dispute between the parties.
C. Fair and Reasonable Settlement
We must next determine whether the proposed settlement represents a fair and reasonable compromise of Atherton's claims against Target. In undertaking this analysis, district courts within the Third Circuit have looked to the factors set forth in Girsh v. Jepson, 521 F.2d 153, 157 (3d Cir. 1975), which established criteria for evaluating the fairness of proposed class-action settlements. See Potoski, 2020 WL 207061, at *3-4 (collecting cases); Kraus, 155 F. Supp. 3d at 523 n.3 (same); see also Brumley, 2012 WL 1019337, at *4-5. Under Girsh, courts examine:
(1) the complexity, expense[,] and likely duration of the litigation; (2) the reaction of the class to the settlement; (3) the stage of the proceedings and the amount of discovery completed; (4) the risks of establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining the class action through the trial; (7) the ability of the defendants to withstand a greater judgement; (8) the range of reasonableness of the settlement fund in light of the best possible recovery; [and] (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation.Girsh, 521 F.2d at 156-57 (citation omitted). Some of the Girsh factors are of "little help, if not irrelevant" outside of the class- and collective-action context, so courts need not apply them mechanically. Howard, 197 F. Supp. 3d at 777 n.1 (citing Kraus, 155 F. Supp. 3d at 523 n.3). The factors most applicable in single-plaintiff cases are the "cost-benefit analysis" of settling versus proceeding to trial and the existence of arms-length negotiations in reaching the proposed settlement. Id.
Viewed through this prism, we conclude that the parties' proposed settlement constitutes a fair and reasonable compromise of Atherton's claims. Atherton's counsel acknowledges in a declaration that Atherton faces certain risks if he proceeds with his FLSA claims. (See Doc. 12-1 ¶ 15; see also Doc. 13 at 3). The parties ostensibly explored and gained an adequate appreciation for the strengths and weaknesses of their respective positions during negotiations. (See Doc. 12-1 ¶ 11; Doc. 13 at 1-2). And the parties agree that the proposed settlement provides Atherton with sufficiently reasonable compensation. [Redacted] Weighing all of the applicable factors, we find that the proposed settlement presents a fair and reasonable resolution of Atherton's claims.
D. Reasonableness of Attorneys' Fees
We must also consider the reasonableness of the proposed award of attorneys' fees. See 29 U.S.C. § 216(b); see also Kraus, 155 F. Supp. 3d at 533. In the FLSA settlement context, courts apply the percentage-of-recovery method to evaluate the propriety of a requested fee award, and then "cross-check" that figure against the lodestar calculation. See, e.g., Kraus, 155 F. Supp. 3d at 533 (citing Keller v. TD Bank, No. 12-5054, 2014 WL 5591033, at *14 (E.D. Pa. Nov. 4, 2014)). Courts reviewing private, single-plaintiff FLSA settlements have looked to the percentage-of-recovery factors applied to common-fund settlements to assess the reasonableness of requested attorneys' fees. See id. Those factors include:
(1) the size of the fund created and the number of persons benefitted; (2) the presence or absence of substantial objections by members of the class to the
settlement terms and/or fees requested by counsel; (3) the skill and efficiency of the attorneys involved; (4) the complexity and duration of the litigation; (5) the risk of nonpayment; (6) the amount of time devoted to the case by plaintiffs' counsel; and (7) the awards in similar cases.Id. (quoting Gunter v. Ridgewood Energy Corp., 223 F.3d 190, 195 n.1 (3d Cir. 2000)).
The representation agreement here contemplates (and Atherton's counsel requests) a fee of $ [Redacted] , or [Redacted] % of the total settlement amount. (Doc. 12-1 ¶ 16). Counsel indicates that he spent [Redacted] hours on the case, and that his usual rate is $ [Redacted] , resulting in a total fee lodestar of approximately $ [Redacted] . (Id. ¶ 17). The requested fee—while high when compared to the number of hours worked on the case—is reasonable given Atherton's agreement thereto, the size of the settlement, the experience of Atherton's counsel, the risks of litigation, and awards approved in comparable single-plaintiff FLSA settlements. We will thus approve the requested attorneys' fee award.
E. Furtherance of the FLSA
We must lastly determine whether the proposed settlement furthers or frustrates implementation of the FLSA in the workplace. This inquiry requires consideration of three interrelated FLSA objectives: (1) combatting "inequalities in bargaining power between employers and employees," Lynn's Food Stores, 679 F.2d at 1352 (citing Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 706 (1945)); (2) ensuring widespread employer compliance with the FLSA, see Brumley, 2012 WL 1019337, at *7 (citation omitted); and (3) honoring the "private-public character of employee rights," whereby the public has a general interest in employee well- being and access to fair wages, see Cuttic, 868 F. Supp. 2d at 467; see also Brumley, 2012 WL 1019337, at *7 (citation omitted). Having carefully considered the terms of the proposed settlement, we find that the overly broad confidentiality and release clauses are antithetical to the FLSA's objectives.
1. Confidentiality Clause
The robust consensus within the Third Circuit is that FLSA wage-settlement agreements should not be kept confidential. See, e.g., Solkoff, 2020 WL 374582, at *7-8 (collecting cases); Haley v. Bell-Mark Techs. Corp., No. 1:17-CV-1775, 2019 WL 1925116, at *5-6 (M.D. Pa. Apr. 30, 2019) (Conner, C.J.) (same); Brumley, 2012 WL 300583, at *3 (same). Compelled silence restricts public knowledge of the claimed wrong, creating an information imbalance between employers and employees and obstructing discovery of FLSA violations and vindication of FLSA rights. Solkoff, 2020 WL 374582, at *7; see also Haley, 2019 WL 1925116, at *5 (collecting cases).
District courts will occasionally approve narrowly drawn confidentiality clauses. Clauses that have survived judicial scrutiny were limited in scope and prohibited employees only from disparaging their employers, discussing the terms of the settlement with press and media, or disclosing information about settlement negotiations themselves. See, e.g., McGee v. Ann's Choice, Inc., No. 12-2664, 2014 WL 2514582, at *3 (E.D. Pa. June 4, 2014); In re Chickie's & Pete's Wage & Hour Litig., No. 12-6820, 2014 WL 911718, at *3 (E.D. Pa. Mar. 7, 2014). The courts found that these clauses furthered implementation of the FLSA by maintaining public access to the settlements and allowing employees to discuss the terms with their coworkers. See McGee, 2014 WL 2514582, at *3; In re Chickie's & Pete's, 2014 WL 911718, at *3.
The confidentiality clause at issue sub judice is not narrowly drawn. Its prohibition on disclosure of negotiation-related information is permissible. See In re Chickie's & Pete's, 2014 WL 911718, at *3. But the balance of the clause sweeps far too broadly, prohibiting Atherton from disclosing information about the facts of his case or the terms and amount of the settlement to anyone other than his spouse, attorneys, tax advisors, "or as required by law." (Doc. 10, Ex. A ¶ 13). Given its breadth, this clause cannot be said to further implementation of the FLSA in the workplace.
Recently, several district courts have upheld seemingly broad confidentiality clauses by narrowly interpreting their terms. These courts have construed language permitting disclosure as "required by law" to mean that the agreement allows the plaintiff to disclose the settlement's terms to friends, family, coworkers, and individuals not associated with media, and thus furthers the goals of the FLSA. See, e.g., Kutz v. Cargill Cocoa & Chocolate, Inc., No. 3:19-CV-176, 2019 WL 5457776, at *9 (M.D. Pa. Oct. 23, 2019) (citing Li v. Family Garden II, Inc., No. 5:18-CV-1325, 2019 WL 1296258, at *3 (E.D. Pa. Mar. 20, 2019)); Sawyer v. Health Care Sols. at Home, Inc., No. 5:16-CV-5674, 2019 WL 1558668, at *5-6 (E.D. Pa. Apr. 10, 2019) (same). The instant settlement agreement also includes a "required by law" exception, but such broad construction is not appropriate here. Target has described the existing confidentiality clause as a "material term to the Settlement," (Doc. 12-1 ¶ 12; Doc. 13 at 1-2), and Atherton's counsel "understood that [Target] would not agree to the Settlement absent the inclusion of a confidentiality provision," (Doc. 12-1 ¶ 13). We are thus disinclined to read the confidentiality clause to mean anything other than what it plainly says.
By limiting public access to the settlement agreement and prohibiting Atherton from discussing its terms with his former coworkers, the confidentiality clause frustrates the FLSA's objective of widespread employer compliance and thwarts the private-public character of FLSA employee rights. We find that the confidentiality clause frustrates implementation of the FLSA, and we cannot approve it in its current form.
2. Release-of-Claims Provision
District courts reviewing proposed FLSA settlements frequently require litigants to limit the scope of waiver and release provisions to "claims related to the specific litigation." Singleton v. First Student Mgmt. LLC, No. 13-1744, 2014 WL 3865853, at *8-9 (D.N.J. Aug. 6, 2014); see also Bettger, 2015 WL 279754, at *8 (collecting cases). Courts must closely examine FLSA settlements containing "pervasive" releases that "confer[] an uncompensated, unevaluated, and unfair benefit on the employer." Brumley, 2012 WL 1019337, at *8 (citation omitted). Provisions requiring employees to generally release and waive "any and all claims" against employers contravene the FLSA objective of maintaining equal bargaining power between employers and employees, thereby "impermissibly frustrat[ing] implementation of an otherwise fair and reasonable settlement." Kraus, 155 F. Supp. 3d at 533 (citing Bettger, 2015 WL 279754, at *8-9).
The proposed settlement agreement includes a specific release of all claims that could have been asserted in Atherton's charge of discrimination and instant lawsuit. (See Doc. 10, Ex. A ¶ 4). This narrowly tailored release is permissible: it appears to contemplate only those claims that are "related to the specific litigation." See Singleton, 2014 WL 3865853, at *8-9: see also Bettger, 2015 WL 279754, at *8-9.
The trouble lies with the proposed settlement agreement's general release, which we reproduce in full to illustrate its breadth. By the general release's terms, Atherton agrees to release Target from any and all claims
arising out of ATHERTON'S employment with TARGET, the separation of ATHERTON's employment with TARGET, or any other fact, condition, circumstance, or occurrence whatsoever up to and including the effective date of this Agreement, whether known or unknown, suspected or concealed, and whether presently asserted or otherwise, including, but not limited to, all claims that any or all of the TARGET RELEASED PARTIES:
• violated public policy or common law (including, but not limited to, claims for breach of contract, intentional or tortious interference with contract or business relations, fraud, misrepresentation, conversion, promissory estoppel, detrimental reliance, wrongful termination, retaliatory discharge, assault, battery, personal injury, defamation, libel, slander, negligence, negligent hiring, retention or supervision, invasion of privacy, conspiracy, negligent, reckless, or intentional infliction of emotional distress, and/or mental anguish, or loss of consortium); or
• violated TARGET's personnel policies, procedures, or handbooks, any covenant of good faith and fair dealing, or any purported contract of employment, express or implied, between ATHERTON and TARGET; or
• failed to provide ATHERTON with any benefits pursuant to the terms of any employee benefit plan maintained, administered, sponsored, funded and/or paid, in whole or in part, by TARGET, violated the terms of any such employee benefit plan, breached any fiduciary obligation with respect to such plan, or discriminated against ATHERTON for the purpose of preventing ATHERTON from obtaining benefits pursuant to the terms of any such plan, or in any way violated any provisions of the Employee Retirement Income Security Act of 1974 . . . ; or(Doc. 10, Ex. A ¶ 5).
• retaliated against or discriminated against ATHERTON on the basis of age, race, color, sex (including sexual harassment), national origin, ancestry, religion, disability, handicap, veteran status, sexual orientation, marital status, parental status, source of income, or any other basis in violation of any city, local, state, or federal laws, statutes, ordinances, executive orders, regulations, or constitutions or otherwise violated any city, local, state, or federal laws, statutes, ordinances, executive orders, regulations, or constitutions, including the Age Discrimination in Employment Act of 1967 . . . , Title VII of the Civil Rights Act of 1964 . . . , the Civil Rights Act of 1866 . . . , the Fair Labor Standards Act of 1938 . . . , the Americans with Disabilities Act of 1990 . . . , the Equal Pay Act of 1963 . . . . Additionally, ATHERTON agrees to waive his right to bring a lawsuit under any state or local law relating to or arising from his employment.
This general release is all-encompassing. It purports to bar Atherton from raising any claim whatsoever that he may have against Target, even if that claim is presently unknown to him and wholly unrelated to this lawsuit. The parties have supplied no information from which the court can assess the value of the released claims, and they do not otherwise justify the scope of the waiver. This court and others routinely reject such sweeping general releases. See, e.g., Haley, 2019 WL 1925116, at *6-7; Kraus, 155 F. Supp. 3d at 532-33; Bettger, 2015 WL 279754, at *4, 8-9. We conclude that the breadth of this clause impermissibly frustrates implementation of the FLSA. As a consequence, we decline to approve the general release clause in its current form.
IV. Conclusion
Under circumstances like these, we would ordinarily grant the parties' joint motion in part and instruct them to file a revised settlement agreement removing the problematic clauses. But the parties here have indicated that the presently worded confidentiality provision was material to Target's willingness to settle, (see Doc. 12-1 ¶¶ 12-13; Doc. 13 at 1-2), and the settlement itself is conditioned on court approval of its existing terms, (see Doc. 10, Ex. A ¶ 2). We will accordingly grant the parties a brief period in which to either revise their proposed settlement agreement to remedy the concerns identified herein or file a request for a case management conference to schedule further proceedings. An appropriate order shall issue.
/S/ CHRISTOPHER C. CONNER
Christopher C. Conner, Chief Judge
United States District Court
Middle District of Pennsylvania Dated: February 7, 2020