Webb v. Southern Aluminum Manufacturing Acquisition, Inc.

IN THE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF ARKANSAS

EL DORADO DIVISION

DARRYL WEBB, individually

and on behalf of all others similarly

situated PLAINTIFF

v. Case No. 1:19-cv-1059

SOUTHERN ALUMINUM MANUFACTURING

ACQUISITION, INC. DEFENDANT

ORDER

Before the Court is the parties’ Renewed Joint Motion to Dismiss with Prejudice and for

Approval of Settlement Agreement. (ECF No. 22). The Court held a hearing on the motion on

February 10, 2022. (ECF No. 31). The matter is ripe for consideration.

I. BACKGROUND

On December 6, 2019, Plaintiff Darryl Webb filed this action individually and on behalf

of all others similarly situated, alleging that Defendant willfully violated the Fair Labor Standards

Act (“FLSA”), 29 U.S.C. § 201 et seq., and the Arkansas Minimum Wage Act (“AMWA”), Ark.

Code Ann. § 11-4-201, et seq. Specifically, Plaintiff alleges Defendant failed to include bonuses

in its overtime calculations for employees who worked more than forty hours in a given workweek

and received a bonus during that workweek. Plaintiff also alleges that Defendant rounded down

its hourly employees’ number of hours worked, causing the payroll records to inaccurately reflect

the time worked by those employees.

On September 10, 2020, the parties moved the Court to certify this case as a collective

action under the FLSA, approve the parties’ proposed settlement agreement, and dismiss the case.

(ECF No. 14). On April 5, 2021, the Court granted conditional certification of a collective action

for settlement purposes but denied as premature the request for settlement approval and dismissal.

(ECF No. 21). The Court authorized the notice plan to be sent to the prospective collective

members, which totaled 320 of Defendant’s current and former employees. Notice was issued

along with individual checks that each potential member could negotiate during a designated opt-

in period and thereby opt into the collective. By the end of the opt-in period, 223 people cashed

their checks and joined the collective.

On August 27, 2021, the parties filed the instant motion, indicating that they have resolved

all claims in this case, as captured in a proposed Settlement Agreement filed with the Court. (ECF

No. 22-2). They ask the Court to approve their settlement, appoint Plaintiff’s counsel as Group

Counsel for settlement purposes only, and dismiss this case with prejudice.

II. DISCUSSION

The FLSA was enacted for the purpose of protecting workers from “substandard wages

and oppressive working hours.” Barrentine v. Ark.-Best Freight Sys., 450 U.S. 728, 739 (1981).

“Recognizing that there are often great inequalities in bargaining power between employers and

employees, Congress made the FLSA’s provisions mandatory; thus, the provisions are not subject

to negotiation or bargaining between employers and employees.” Loseke v. Depalma Hotel Corp.,

No. 4:13-cv-3191, 2014 WL 3700904, at *1 (D. Neb. July 24, 2014) (citing Lynn’s Food Stores,

Inc. v. United States, 679 F.2d 1350, 1352 (11th Cir. 1982)). “FLSA rights cannot be abridged by

contract or otherwise waived because this would ‘nullify the purposes’ of the statute and thwart

the legislative policies that it was designed to effectuate.” Barrentine, 450 U.S. at 740.

There are two ways in which FLSA wage claims can be settled or compromised by

employees. First, an employee may accept full payment of unpaid wages under the supervision of

the Secretary of Labor. 29 U.S.C. § 216(c). Second, when employees bring a private action for

back wages under the FLSA, the Court may enter a stipulated judgment after scrutinizing the

settlement for fairness. Beauford v. ActionLink, 781 F.3d 396, 405 (8th Cir. 2015); Copeland v.

ABB, Inc., 521 F.3d 1010, 1014 (8th Cir. 2008). However, most FLSA cases are not compromised

under either category but, like here, are instead submitted to the district court for approval and

dismissal with prejudice, which would have the same effect as a stipulated judgment. Melgar v.

OK Foods, No. 2:13-cv-2169-PKH, 2017 WL 10087890, at *1 (W.D. Ark. Jan. 26, 2017).

It remains an open question in the Eighth Circuit whether the FLSA requires judicial

approval to settle bona fide disputes over wages owed. Barbee v. Big River Steel, LLC, 927 F.3d

1024, 1026 (8th Cir. 2019); Melgar v. OK Foods, 902 F.3d 775, 779 (8th Cir. 2018). When asked,

this Court and others in the Eighth Circuit typically review a proposed FLSA settlement’s terms

for fairness to ensure the parties are not left in an “uncertain position.” See, e.g., King v. Raineri

Const., LLC, No. 4:14-cv-1828 (CEJ), 2015 WL 631253, at *2 (E.D. Mo. Feb. 12, 2015). In doing

so, the Court will only approve a FLSA settlement agreement if the case “involves a bona fide

dispute and . . . the proposed settlement is fair and equitable to all parties.” Frye v. Accent Mktg.

Servs., LLC, No. 4:13-cv-59 (CDP), 2014 WL 294421, at *1 (E.D. Mo. Jan. 27, 2014). The Court

will determine those two issues in that order.

A settlement addresses a bona fide dispute when it “reflects a reasonable compromise over

issues actually in dispute.” King, 2015 WL 631253, at *2 (citing D.A. Schulte, Inc. v. Gangi, 328

U.S. 108, 115 (1946)). After all, if there was no dispute that a plaintiff is owed wages, allowing

the FLSA claims to settle would allow the parties to improperly negotiate around mandatory FLSA

entitlements. Barrentine, 450 U.S. at 739-40. The “threshold for establishing whether a bona fide

dispute exists between the parties is a low one met where the parties are in disagreement about the

wages to be paid and liability of the issues.” Netzel v. W. Shore Grp., Inc., No. 16-cv-2552

(RHK/LIB), 2017 WL 1906955, at *4 (D. Minn. May 8, 2017).

In this case, Plaintiff alleged that Defendant failed to include bonuses in its overtime

calculation for employees who worked more than forty hours in a workweek and who received a

bonus during that week.1 Defendant denied liability, stated affirmatively that it attempted to

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comply in good faith with the relevant provisions of the FLSA and the AMWA, and denied that

liquidated damages are applicable in this case. The Court is satisfied that this case involves bona

fide disputes over FLSA provisions.

To now determine whether the proposed FLSA settlement is fair and reasonable, the Court

considers the totality of the circumstances, including factors such as “the stage of the litigation and

the amount of discovery exchanged, the experience of counsel, the probability of success on the

merits, any ‘overreaching’ by the employer in the settlement negotiations, and whether the

settlement was the product of an arm’s length negotiation between the parties based on the merits

of the case.”2 Trogdon v. Kleenco Maint. & Constr., Inc., No. 5:14-cv-5057-PKH, 2016 WL

1F

7664285, at *2 (W.D. Ark. Nov. 18, 2016). “This approach focuses on the fairness of the process

used by the parties in reaching a settlement.” Grahovic v. Ben’s Richardson Pizza Inc., No. 4:15-

cv-1659-NCC, 2016 WL 1170977, at *2 (E.D. Mo. Mar. 25, 2016).

The parties, each represented by experienced counsel, reached their settlement relatively

quickly. This case was filed on December 6, 2019. After Defendant filed its answer on January

10, 2020, the first motion filed by either party came on June 4, 2020, where the parties jointly

indicated they were discussing a possible settlement and sought an extension of the time to move

1 At the hearing, the parties indicated that the settlement forfeits Plaintiff’s claim that Defendant improperly calculated

hourly employees’ clock-in and clock-out times because the alleged rounding practice could have also resulted in

overpayments to those workers.

2 When applicable, other factors that may be considered include: (1) the amount of overtime to which class members

may be entitled; (2) how close to full compensation of class members' claims the proposed settlement provides; (3)

whether the proposed settlement includes or excludes liquidated damages and/or attorney’s fees and expenses; (4) the

likely complexity, expense, and duration of the litigation if the settlement is not approved; and (5) what additional

claims class members must release in order to receive compensation under the proposed settlement agreement. Lewis-

Ramsey v. Evangelical Lutheran Good Samaritan Soc'y, No. 3:16-cv-00026, 2017 WL 821656, at *5 (S.D. Iowa Jan.

10, 2017).

for certification. The Court granted the extension, and on September 10, 2020, the parties indicated

they had reached their settlement agreement and asked to begin the judicial FLSA settlement

process and for dismissal of the case. No other motion practice occurred up to that point. At the

hearing on the instant motion, counsel represented that they were able to settle the case quickly

and without the ordinary motion practice seen in FLSA cases because they engaged in substantial

informal discovery before the formal discovery period opened. Defense counsel produced all

relevant payroll records in an organized and accessible format, allowing Plaintiff’s counsel to

promptly determine the makeup of a potential class and/or collective.

At the hearing, the Court indicated that the parties’ quick resolution of this case, prior to

any formal discovery having occurred, gave the Court concern that the proposed settlement was

not the result of arm’s length negotiation after the parties assessed their relative likelihood of

success on the merits. Counsel for both parties discussed their experience with FLSA claims and

detailed the probability of Plaintiff’s success at trial. The information informally produced by

Defendant allowed the parties to assess the strengths and weaknesses of their relative positions,

which informed the parties’ decision to settle. The settlement would give Plaintiff and the

collective substantial relief now without the need, cost, and risk of extended litigation and a

potential trial. From these representations, the Court is satisfied that the proposed merits

settlement is the good-faith product of arm’s length negotiation between the parties’ experienced

counsel, based on the merits of the case rather than some other improper purpose. See Grahovic,

2016 WL 1170977, at *3 (finding a settlement fair and reasonable when the parties had not

engaged in formal discovery but informally exchanged all relevant payroll documents that allowed

the parties to assess the strengths of their positions prior to settlement talks).

The parties’ proposed settlement agreement provides for the creation of a common fund

totaling $57,097.00, representing the amount of unpaid overtime premium allegedly withheld by

Defendant and an equal amount in liquidated damages. The agreement provides for 60% of the

common fund to be earmarked as a maximum damages settlement for Plaintiff and the collective.

Based on the individual damage calculations performed by Plaintiff’s counsel, each potential

collective member who negotiated their opt-in check would receive 100% of their unpaid overtime

premium and 60% of their combined unpaid overtime premium and alleged liquidated damages, a

figure that represents a negotiated compromise based on Plaintiff’s chances of success on the

claims in this case. If every potential member of the collective negotiated their checks during the

opt-in period and joined the collective, the damages paid to Plaintiff and the collective would have

totaled $34,258.20, the entire 60% of the fund that was allocated for damages. However, because

only 223 of the 320 potential collective members cashed their checks and opted in, the damages

actually paid equaled $30,934.32, with the difference reverting to Defendant. The agreement also

provides for 40% of the total settlement fund, $22,838.80, to be awarded to Plaintiff’s counsel as

attorney’s fees and costs, regardless of the participation in the collective. The Court now addresses

those attorney’s fees.

The Eighth Circuit has assumed, without deciding, that if FLSA settlements are subject to

judicial review, district courts have “the authority to ensure (1) the attorney fees were in fact

negotiated separately and without regard to the plaintiff’s FLSA claim, and (2) there was no

conflict of interest between the attorney and his or her client.”3 Vines v. Welspun Pipes Inc., 9

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F.4th 849, 853-54 (8th Cir. 2021) (cleaned up). If the Court answers those questions affirmatively,

then it lacks the authority under the FLSA to review the settled attorney’s fees. Barbee, 927 F.3d

at 1027. If, however, the attorney’s fees were not negotiated separately and apart from the merits

3 The parties have moved for the Court’s approval of the FLSA settlement, so the Court uses the law to be applied if

judicial review of FLSA settlements is required. See Seow v. Miyabi Inc., No. 19-cv-2692 (JNE/DTS), 2021 WL

3616894, at *1 (D. Minn. July 15, 2021) (doing the same); Bryson v. Patel, No. 4:20-cv-0065-ERE, 2021 WL

2446352, at *1 (E.D. Ark. June 15, 2021) (same).

settlement, the Court may then review the fees for reasonableness. See Vines, 9 F.4th 849, 855-57

(reviewing a reduced award of attorney’s fees after finding the district court correctly determined

the fees were not negotiated separately from the FLSA merits settlement).

Counsel stated at the motion hearing that the parties separately negotiated the settled

attorney’s fees from the FLSA merits settlements and that Plaintiff’s contingency arrangement

with counsel did not reduce the damages awarded to Plaintiff and the collective under the

settlement. However, the settled attorney’s fees were nonetheless calculated as a “percentage of

the fund,” with the fees comprising 40% of the total common fund established under the settlement.

When, like here, settled attorney’s fees are calculated as a percentage of a total FLSA settlement

common fund, district courts throughout the Eighth Circuit have found that Barbee’s limitation on

fee review does not apply because, among other reasons, the fees are necessarily intertwined with

the FLSA merits settlement. Guy v. DMG Installations, Inc., No. 4:20-cv-0331-SBJ, 2021 WL

4973251, at *5-6 (S.D. Iowa Oct. 22, 2021); Johnson v. Himagine Sols., Inc., No. 4:20-cv-0574-

SPM, 2021 WL 2634669, at *6 n.3 (E.D. Mo. June 25, 2021); Sandoval-Osegura v. Harvey Pallets

Mgmt. Grp., LLC, No. 4:19-cv-0096-AGF, 2021 WL 2337614, at *2 n.3 (E.D. Mo. June 8, 2021);

Del Toro v. Centene Mgmt. Co., LLC, No. 4:19-cv-2635-JAR, 2021 WL 1784368, at *2 (E.D. Mo.

May 5, 2021).

Thus, the Court has authority to review the proposed agreement’s percentage-of-the-fund

approach to calculating fees, which is appropriate if the fees are fair and reasonable. Del Toro,

WL 1784368, at *3. The Court does so while remembering that “where the parties have already

agreed upon the fees to be paid, any required review need not be a line-by-line, hour-by-hour

review of attorneys’ fees.” Melgar, 902 F.3d at 779. Rather, the review “requires a certain level

of deference . . . to the parties’ settlement agreement” and “is more deferential than resolving

attorneys’ fees in a disputed case.” Id. at 779-80.

The Eighth Circuit has not offered a specific test for considering the reasonableness of

attorney’s fees calculated as a percentage of the fund, but district courts in the Eighth Circuit

frequently use the following factors set out by the Fifth Circuit in Johnson v. Georgia Highway

Express:

(1) the time and labor required; (2) the novelty and difficulty of the questions; (3)

the skill requisite to perform the legal service properly; (4) the attorney’s preclusion

of other employment due to acceptance of the case; (5) the customary fee; (6)

whether the fee is fixed or contingent; (7) the time limitations imposed by the client

or the circumstances; (8) the amount involved and the results obtained; (9) the

experience, reputation, and ability of the attorneys; (10) the “undesirability” of the

case; (11) the nature and length of the professional relationship with the client; and

(12) awards in similar cases.

488 F.2d 714, 719-20 (5th Cir. 1974); see also Allen v. Tobacco Superstore, Inc., 475 F.3d 931,

944 (8th Cir. 2007) (finding no abuse of discretion where the district court considered the Johnson

factors in determining the final fee award). Not all factors will apply in every case and not all need

to weigh in favor of the ultimate fee award. Browne v. P.A.M. Transp., Inc., No. 5:16-cv-5366-

TLB, 2020 WL 4430991, at *2 (W.D. Ark. July 31, 2020). The Johnson factors overlap almost

completely with the factors laid out by the Arkansas Supreme Court for assessing appropriate

attorney fees under state law, such as the AMWA claim in this case. Chrisco v. Sun Industries,

Inc., Chrisco v. Sun Indus., Inc., 304 Ark. 227, 229, 800 S.W.2d 717, 718-19 (1990); see also All-

Ways Logistics, Inc. v. USA Truck, Inc., 583 F.3d 511, 520-21 (8th Cir. 2009) (endorsing the use

of the Chrisco factors in matters of Arkansas state law).

Plaintiff’s counsel took this case on a contingency basis, with no guarantee of success and

significant risk of no recovery, and thus, no attorney’s fees. Counsel for both sides have

demonstrated their experience in class action litigation. The settlement was achieved after the

parties informally exchanged significant amounts of documents, allowing for the determination of

who the potential collective members are, the hours they worked, the wages they were paid, and

the strengths and weaknesses of the parties’ respective claims and defenses. The settlement

amount is substantial, with Plaintiff and the collective receiving 100% of their unpaid overtime

premium and roughly 60% of their combined unpaid overtime premium and alleged liquidated

damages. The 40% attorney’s fee amount is slightly higher than the range ordinarily awarded in

percentage-of-the-fund cases. See Caligiuri v. Symantec Corp., 855 F.3d 860, 866 (8th Cir. 2017)

(noting the ordinary range of 25% to 36%). However, any skepticism the Court might have about

approving that award is overcome by the benefit provided to Plaintiff and the collective, as well

as the Eighth Circuit’s admonition that courts should give a certain amount of deference when

reviewing agreed attorney’s fees in FLSA settlements. See Johnson v. Thomson Reuters, No. 18-

cv-0070-PJS/HB, 2019 WL 1254565, at *6 (D. Minn. Mar. 19, 2019) (approving agreed fee

request in FLSA settlement after expressing skepticism about the fee request’s reasonableness);

Roark v. Nat’l Park Motors, Inc., No. 6:17-cv-6131-PKH, 2019 U.S. Dist. LEXIS 5530, at *5-6

(W.D. Ark. Jan. 11, 2019) (same). Accordingly, 40% of the settlement fund, or $22,838.80, is a

fair and reasonable attorney’s fee based on the specific circumstances of this case.

III. CONCLUSION

For the above-stated reasons, the parties’ joint motion (ECF No. 22) is hereby GRANTED.

Christopher Burks and Brandon Haubert are appointed as Group Counsel for settlement purposes

only. The parties’ proposed settlement agreement is approved as fair and reasonable in all respects.

This case is DISMISSED WITH PREJUDICE. The Court will retain jurisdiction to vacate this

order and reopen this action upon cause shown that the settlement has not been completed and

further litigation is necessary.

IT IS SO ORDERED, this 15th day of March, 2022.

/s/ Susan O. Hickey

Susan O. Hickey

Chief United States District Judge