CADDICK v. TASTY BAKING COMPANY

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

WILLIAM CADDICK, STEPHEN

HOPKINS, individually and on behalf of

all similarly situated individuals, Case No. 2:19-cv-02106-JDW

Plaintiff

v.

TASTY BAKING COMPANY,

Defendant

MEMORANDUM

The parties to this case ask the Court for preliminary approval of a proposed settlement of

the collective claims under the Fair Labor Standards Act and class claims under Pennsylvania,

New Jersey, and Maryland state law. After reviewing the facts and the proposed agreement, the

Court grants the motion for preliminary approval and preliminarily certifies three classes for claims

under state laws. However, the Court also concludes that the confidentiality provision in the

proposed agreement would frustrate the purpose of the FLSA, so the Court will narrow it.

I. BACKGROUND

A. Factual Allegations

Tasty manufactures, distributes, and sells baked products. Tasty entered into contracts with

individual distributors, including William Caddick, Stephen Hopkins, Raymond Keeler, and

Anthody Bertino (the “Class Reps”), who purchase distribution rights to sell and distribute Tasty

products to customers. The Class Reps operate in Pennsylvania, New Jersey, or Maryland.

The Class Reps allege that Tasty exerts significant control over the distributors’ work.

Tasty determines product prices, negotiates with retail customers regarding pricing and

merchandising, adjusts orders, and dictates how distributors stock shelves and participate in

marketing initiatives. The Class Reps also allege that Tasty pays distributors based on a

“complicated system” in which distributors purchase the products from Tasty at prices that Tasty

sets. (ECF No. 1, ¶ 19.) Once a distributor sells the products to the customer, the distributor

receives credit for the products’ ultimate sale price, plus a commission if applicable. The Class

Reps contend that Tasty and store customers negotiate this price without any meaningful input

from distributors.

Tasty classifies distributors, including the Class Reps, as independent contractors. As a

result, Tasty makes certain deductions to distributors’ weekly pay and does not pay them overtime.

The Class Reps argue, however, that Tasty should have classified them as employees and seek

damages for unpaid overtime wages under the FLSA and reimbursement for deductions that they

contend were unlawful under Pennsylvania, New Jersey, or Maryland law.

B. Procedural History

Messrs. Caddick and Hopkins filed the initial complaint in this Court on May 15, 2019, on

behalf of themselves and a class of distributors. In their Complaint, they alleged claims for unpaid

overtime under the FLSA, improper pay deduction under the Pennsylvania Wage Payment and

Collection Law, and recovery of certain expenses under the theory of unjust enrichment. The Court

dismissed Plaintiffs’ unjust enrichment claim on December 17, 2019. On January 24, 2020, the

Court granted a motion for conditional certification of the FLSA claims. The FLSA Collective

Action is defined as “[a]ll persons in the United States who, pursuant to a ‘Distribution Agreement’

or a similar written contract, are or have performed work as ‘Distributors’ for Tasty Baking

Company during the period commencing three years prior to the commencement of this action

through the close of the Court-determined opt-in period and who file a consent to join this action

pursuant to 29 U.S.C. § 216(b).” There are currently 56 collective action members.

Mr. Bertino filed a case in the District of New Jersey, alleging class claims under the New

Jersey Wage and Payment Law. On November 17, 2020, in light of the parties’ settlement

discussions, the New Jersey Court transferred that action to this Court, and the Court consolidated

the cases. On February 16, 2021, the Class Reps filed a Second Amended Complaint that adds Mr.

Keeler as a party. Mr. Keeler brings Maryland Wage and Payment Collection Law claims on behalf

of himself and a class of Maryland distributors. All Class Reps premise their claims on the

allegation that Tasty improperly classifies its distributors as independent contractors.

C. The Settlement

As a result of their negotiations, the Parties agreed to a settlement that includes monetary

and non-monetary relief to the Class Reps and the classes they seek to represent. The settlement

includes any individual who operated under a “distributor agreement with Tasty during a Covered

Period out of a warehouse in either Pennsylvania, New Jersey, or Maryland; and who did not

previously sign individually, or on behalf of a business entity, a distributor agreement or an

amendment containing an arbitration agreement with a class action waiver.” (ECF No. 62-2 at ¶

3.6.) There are 119 individuals in the Pennsylvania class, 54 individuals in the New Jersey class,

and 53 in the Maryland class. The settlement also covers those 56 individuals who opted into the

FLSA action.

Pursuant to the terms of the settlement, Tasty will create a total settlement fund of

$3,150,000, which provides: (i) payment to Class and Collective Members; (ii) service award to

each of the named plaintiffs for $5,000 each; (iii) attorneys’ fees of $1,050,000. In exchange,

Plaintiffs and class members who choose to participate in the settlement agree not to disclose the

final settlement amount and to release Tasty from any past claims based on the alleged

misclassification of putative class members and FLSA collective members as independent

contractors.

Additionally, the settlement fund includes a payment of $3,500 each to current distributors

who sign, date, and cash their settlements as consideration for agreeing to the terms of the

arbitration agreement. The arbitration agreement adds alternative dispute procedures and includes

a class action waiver. The Parties have agreed on a third-party settlement administrator who will

provide notice to all the members of the FLSA collective and the class actions.

II. LEGAL STANDARD

Review of proposed Rule 23 class settlement typically proceeds in two steps: (1) a

preliminary approval and (2) a subsequent fairness hearing. See In re Nat'l Football League

Players’ Concussion Inj. Litig., 961 F. Supp. 2d 708, 713–14 (E.D. Pa. 2014). Although Rule 23

process governs class action settlements and not FLSA collective actions, courts in this Circuit

apply the two-step process to FLSA claims. See, e.g., Williams v. Aramark Sports, LLC, No.

CIV.A. 10-1044, 2011 WL 4018205, at *9 (E.D. Pa. Sept. 9, 2011) (“For essentially the same

reasons the Court found that the Rule 23 requirements were met, the Court also finds that the FLSA

collective action requirements are met in this case.”); Hall v. Accolade, Inc., No. CV 17-3423,

2019 WL 3996621, at *3 n. 2 (E.D. Pa. Aug. 23, 2019)(preliminarily approving FLSA collective

action based on two-step Rule 23 approval process).

Preliminary approval of a proposed class action settlement is left to the discretion of the

trial court. In re Prudential Ins. Co. Am. Sales Prac. Litig. Agent Actions, 148 F.3d 283, 317 (3d

Cir. 1998). “The fair, reasonable and adequate standard is lowered, and the court is required to

determine whether the proposed settlement discloses grounds to doubt its fairness or other obvious

deficiencies. . . .” Nat. Football League, 961 F. Supp. 2d at 714 (quoting another source).

Nevertheless, “[p]preliminary approval is not simply a judicial ‘rubber stamp’ of the parties’

agreement.” Id. Rather, it is “based on an examination of whether the proposed settlement is

‘likely’ to be approved under Rule 23(e)(2).” Wood v. Saroj & Manju Invs. Philadelphia LLC, No.

CV 19-2820-KSM, 2020 WL 7711409, at *10 (E.D. Pa. Dec. 28, 2020) (citing Fed. R. Civ. P.

23(e)(1)(B)(i) and other sources).

Where settlement precedes class certification, a court may preliminarily certify the class

for purposes of providing notice. See In re Nat. Football League Players Concussion Inj. Litig.,

775 F.3d 570, 581-82 (3d Cir. 2014); see also Amchem v. Windsor, 521 U.S. 591, 620-22 (1997)).

Certification at this stage is not final. See In re CertainTeed Corp. Roofing Shingle Prods. Liab.

Litig., 269 F.R.D. 468, 476 (E.D. Pa. 2010) (citing In re Gen. Motors Corp. Pick-Up Truck Fuel

Tank Prods., 55 F.3d 768, 786 (3d Cir. 1995)). “Final certification vel non of the class is

determined by the court at the same time as the court rules on whether the final settlement

agreement is to be approved.” Id.

This Court’s prior FLSA conditional certification (ECF No. 42-43) is sufficient at the

preliminary approval stage to permit the FLSA collective members to receive the appropriate

court-approved notice of this settlement. But the Court has yet to certify state law classes.

Accordingly, the Court will first analyze whether to certify the state law classes and then whether

to approve the terms of the proposed Settlement Agreement preliminarily.

III. DISCUSSION

A. Class Certification

To succeed on a class certification motion, a plaintiff must satisfy all four requirements of

Rule 23(a) and at least one subsection of Rule 23(b). See Johnston v. HBO Film Mgmt., Inc., 265

F.3d 178, 183 (3d Cir. 2001). Rule 23(a) requires a showing of: (1) numerosity; (2) commonality;

(3) typicality; and (4) adequacy. See Fed. R. Civ. P. 23(a). If these four requirements are satisfied,

a plaintiff must show that at least one subsection of Rule 23(b) is met. In this case, Plaintiffs seek

certification pursuant to Rule 23(b)(3). Rule 23(b)(3) contains two explicit requirements:

predominance and superiority. See Carrerra v. Bayer Corp., 727 F.3d 300, 305 (3d Cir. 2013).

Courts conducting this anlaysis as part of a preliminary approval motion can conduct a “less

rigorous analysis” that will be required at the final approval stage. In re: Amtrak Train Derailment

In Philadelphia, Pa., No. 15-MD-2654, 2016 WL 1359725, at * 4 (E.D. Pa. Apr. 6, 2016).

1. Rule 23(a) factors

a. Numerosity

To satisfy the numerosity requirement, a plaintiff must show that the proposed class is so

numerous that joinder of all members is impracticable. This generally requires more than 40 class

members. See In re Modafinil Antitrust Litig., 837 F.3d 238, 249-50 (3d Cir. 2016). Plaintiffs have

shown that each state class includes more than 40 members, making Joinder not practicable.

b. Commonality

The commonality requirement requires a plaintiff to demonstrate that “there are questions

of law or fact common to the class.” Fed. R. Civ. P. 23(a)(2). Commonality does not require the

perfect identity of questions of law or fact among all class members. Reyes v. Netdeposit, LLC,

802 F.3d 469, 486 (3d Cir. 2015). Instead, a plaintiff seeking class certification must demonstrate

that his claims “depend upon a common contention,” the resolution of which “will resolve an issue

that is central to the validity of each one of the claims in one stroke.” Wal-Mart Stores, Inc. v.

Dukes, 564 US 338, 350 (2011). There can be legal and factual differences among the class

members, as long as the defendant subjected them all to the same harmful conduct. The

commonality bar is not a high one. See Rodriguez v. Nat'l City Bank, 726 F.3d 372, 382 (3d Cir.

2013).

The Class Reps have cleared this low bar. For each of their proposed classes, there are at

least two common questions: (1) whether class members were misclassified as independent

contractors; and (2) whether Tasty took improper deductions from class members in violation of

Pennsylvania, New Jersey, or Maryland state law.

c. Typicality

The typicality factor aids a court in determining whether “maintenance of a class action is

economical and whether the named plaintiff’s claim and the class claims are so interrelated that

the interest of the class members will be fairly and adequately protected in their absence.” Marcus

v. BMW of North America, LLC, 687 F.3d 583, 594 (3d. Cir. 2012) (citation omitted). A plaintiff

can meet this requirement when his claims “arise from the same alleged wrongful conduct.” In re

Warfarin Sodium Antitrust Litig., 391 F.3d 516, 532 (3d Cir. 2004). To determine whether a named

plaintiff is so different as to prevent a finding of typicality, a court must address three distinct

concerns: “(1) the claims of the class representative must be the same as those of the class in terms

of both (a) the legal theory advanced and (b) the factual circumstances underlying that theory; (2)

the class representative must not be subject to a defense that is both inapplicable to many members

of the class and likely to become a major focus of the litigation; and (3) the interests and incentives

of the representative must be sufficiently aligned with those of the class.” Id. at 598. The Third

Circuit has set a “low threshold” for typicality, such that even “relatively pronounced factual

differences will generally not preclude a finding of typicality where there is a strong similarity of

legal theories or where the claim arises from the same practice or course of conduct.” In re Nat'l

Football League Players Concussion Injury Litig., 821 F.3d 410, 428 (3d Cir. 2016) (quotes

omitted).

The Class Reps satisfy the typicality requirement. They worked as distributors in their

respective states and claim that Tasty misclassified them as independent contractors rather than

employees. This is the same issue that affects all members of each putative class. Moreover, no

unique defense applies only to class representatives. Finally, class representatives’ interests are

sufficiently aligned with the class members’ interests because both seek the wage and hour

protections of their respective state laws.

d. Adequacy

This final 23(a) factor considers both the plaintiff’s and counsel’s adequacy to represent

the class. “Whether adequacy has been satisfied ‘depends on two factors: (a) the plaintiff’s attorney

must be qualified, experienced, and generally able to conduct the proposed litigation, and (b) the

plaintiff must not have interests antagonistic to those of the class.’” McDonough v. Toys R Us,

Inc., 638 F. Supp. 2d 461, 477 (E.D. Pa. 2009) (quoting New Directions Treatment Servs. v. City

of Reading, 490 F.3d 293, 313 (3d Cir. 2007)). “The second factor ‘seeks to uncover conflicts of

interest between named parties and the class they seek to represent.’” Id. (quoting In re Warfarin

Sodium Antitrust Litig., 391 F.3d 516, 532 (3d Cir. 2004)).

The Court sees nothing to call into question the adequacy of class representatives. They

assert the same claims as class members and are not in any way antagonistic to other members.

The Court also concludes that their counsel easily satisfies the adequacy threshold. Class counsel

has experience prosecuting class actions, and at least one other court in this district has found class

counsel adequate. See Wood, 2020 WL 7711409, at *6 (“Saltz, Mongeluzzi & Bendesky, P.C.—

are qualified to ‘fairly and adequately represent the interests of the class.’”).

2. Rule 23(b) Factors

a. Predominance

Predominance requires the Court to find “questions of law or fact common to class

members predominate over any questions affecting only individual members.” Fed. R. Civ. P.

23(b)(3). “When one or more of the central issues in the action are common to the class and can

be said to predominate, the action may be considered proper under Rule 23(b)(3) even though

other important matters will have to be tried separately, such as damages or some affirmative

defenses peculiar to some individual class members.” Tyson Foods, Inc. v. Bouaphakeo, 136 S.

Ct. 1036, 1045 (2016) (internal quotation marks omitted). The predominance requirement “does

not require a plaintiff seeking class certification to prove that each element of her claim is

susceptible to classwide proof.” Amgen Inc. v. Connecticut Ret. Plans & Tr. Funds, 568 U.S. 455,

469 (2013) (internal punctuation omitted). Nevertheless, “[t]o assess whether predominance is met

at the class certification stage, a district court must determine whether the essential elements of the

claims brought by the putative class are ‘capable of proof at trial through evidence that is common

to the class rather than individual to its members.’” Gonzalez v. Corning, 885 F.3d 186, 195 (3d

Cir. 2018).

Plaintiffs bring claims for violations of their respective state’s wage laws. Each claim's

threshold question is whether Tasty properly classified its distributors as independent contractors

rather than employees under the specific test applicable to that state law. Although the tests vary,

the New Jersey, Maryland, and Pennsylvania tests each emphasize the employer’s right to exercise

control over the employee. See, e.g., Williams v. Jani-King of Phila. Inc., 837 F.3d 314, 319-21

(3d Cir. 2016) (“[T]he right to control, rather than actual control, is the most important of the

factors.”); Baltimore Harbor Charters, Ltd. v. Ayd, 780 A.2d 303, 318-19 (Ct. App. Md. 2001)

(“In applying these factors, the court emphasized that the most crucial consideration is the right to

exercise complete control over the work, including its details.”) (quoting another source).

Likewise, “[i]n order to satisfy part A of the [New Jersey’s] ‘ABC’ test, the employer must show

that it neither exercised control over the worker, nor had the ability to exercise control in terms of

the completion of the work.” Hargrove v. Sleepy’s, LLC, 106 A.3d 449, 459 (N.J. 2015).

Thus, common questions will predominate over individual inquiries in determining

whether Tasty properly classified distributors as independent contractors. The focus in resolving

these claims will be on the right to control. Distributor agreements and other documents regarding

Tasty’s policies are common to the class and shed light on whether Tasty exercised control over

its distributors. See, e.g. Carr v. Flowers Foods, Inc., No. CV 15-6391, 2019 WL 2027299, at *16

(E.D. Pa. May 7, 2019) (“[T]he right to control is susceptible to class-wide proof, based on the

Distributor Agreements and Flowers’ common policies regarding the large chain accounts,

training, and oversight.”). Accordingly, predominance inquiry is satisfied for each state law claim.

b. Superiority

The superiority analysis calls for a determination that a class action is the best method of

achieving a “fair and efficient adjudication of the controversy.” Newton v. Merrill Lynch, Pierce,

Fenner & Smith, Inc., 259 F.3d 154 (3d Cir. 2001), as amended (Oct. 16, 2001) (citing Fed. R.

Civ. P. 23(b)(3)). This requires a “balance, in terms of fairness and efficiency, [of] the merits of a

class action against those of ‘alternative available methods’ of adjudication.” Georgine v. Amchem

Prods., Inc., 83 F.3d 610, 632 (3d Cir. 1996) (citing another source). In determining whether a

class action is the superior method to adjudicate a controversy, courts should consider: “(A) the

class members’ interests in individually controlling the prosecution or defense of separate actions;

(B) the extent and nature of any litigation concerning the controversy already begun by or against

class members; (C) the desirability or undesirability of concentrating the litigation of the claims in

the particular forum; and (D) the likely difficulties in managing a class action.” Fed. R. Civ. P.

23(b)(3)(A)-(D).

As applied to state law classes, these factors weigh in favor of class litigation. The number

of class members, the common interest of class members, and the prevalence of common questions

of law and fact make class action a more efficient vehicle for resolving these claims. Additionally,

concentrating all three class actions in this Court results in considerable efficiency gains given the

many similar issues across the claims. Plaintiffs satisfied this and other class action requirements.

The Court will, therefore, preliminary certify the Pennsylvania, Maryland, and New Jersey classes

pursuant to Rule 23(b)(3).

B. Proposed Settlement Agreement

1. Rule 23(e) Factors

“In evaluating a class action settlement under Rule 23(e), a district court determines

whether the settlement is fundamentally fair, reasonable, and adequate.” Ehrheart v. Verizon

Wireless, 609 F.3d 590, 592 (3d Cir. 2010) (citing Fed. R. Civ. P. 23(e)). In making this

determination, district courts consider whether:

(A) the class representatives and class counsel have adequately represented the

class;

(B) the proposal was negotiated at arm’s length;

(C) the relief provided for the class is adequate, taking into account:

(i) the costs, risks, and delay of trial and appeal;

(ii) the effectiveness of any proposed method of distributing relief to

the class, including the method of processing class-member claims;

(iii) the terms of any proposed award of attorney’s fees, including

timing of payment; and

(iv) any agreement required to be identified under Rule 23(e)(3); and

(D) the proposal treats class members equitably relative to each other.

Fed. R. Civ. P. 23.

a. Adequate representation

This factor focuses “on the actual performance of counsel acting on behalf of the class.”

Fed. R. Civ. P. 23 Advisory Committee Notes (Dec. 1, 2018). Here, class counsel expanded

considerable time and effort on this case, engaged in extensive discovery, “including reviewing

and analyzing a substantial volume of documents, Tasty’s business model, the bakery delivery

business and the nature of the distributors’ work.” (ECF No. 62-1 at 14.) Based on this, the counsel

fully evaluated the strengths and weaknesses of the claims and defenses before reaching the

proposed settlement agreement. (Id. at 13-14.) Thus, this factor weighs in favor of preliminary

approval.

b. Arm’s length negotiation

The parties agreed to settle this case after a full-day mediation session and a series of calls

with a mediator. “[T]he participation of an independent mediator in settlement negotiations

virtually [e]nsures that the negotiations were conducted at arm’s length and without collusion

between the parties.” Bellum v. Law Offices of Frederic I. Weinberg & Assocs., P.C., No. 15-2460,

2016 WL 4766079, at *6 (E.D. Pa. Sept. 13, 2016) (citation and quotation omitted). This factor

weighs in favor of preliminary approval.

c. Adequacy of relief

i. Costs, risks, and delay of trial

This factor balances the “relief that the settlement is expected to provide to class members”

against “the cost and risk involved in pursuing a litigated outcome.” Fed. R. Civ. P. 23 Advisory

Committee Notes (Dec. 1, 2018). Plaintiffs acknowledge the risks of proceeding with their claims

to the certification, summary judgment, and trial stages of this litigation. These include: (1)

whether plaintiffs can establish that they are employees and not independent contractors; (2)

whether any of the FLSA overtime exemptions apply; and (3) whether plaintiffs receive “wages”

under Pennsylvania, New Jersey, or Maryland law.

ii. The proposed method of distributing relief

Under this factor, the Court “scrutinize[s] the method of claims processing to ensure that

it facilitates filing legitimate claims. . . [and] should be alert to whether the claims process is

unduly demanding.” Fed. R. Civ. P. 23 Advisory Committee Notes (Dec. 1, 2018). The settlement

agreement provides individualized notices to each class member. Distributors who have not

previously signed an arbitration agreement with a class action waiver will automatically receive

notice of this settlement. Those who do not exclude themselves from the case will receive a check

for their settlement share without having to file a claim. In other words, unless class members

explicitly ask to be excluded, they will be paid. The settlement notice also explains how to raise

objections and opt-out of the settlement.

iii. Terms of proposed attorney’s fees

The proposed attorneys’ fees are $1,050,000 out of $3,150,000. This equals a 33%

attorney’s fees award. Another court in this district has observed that “the average attorney’s fees

percentage in [class action settlements] was 31.71% and that the median fee award was 33.3%.”

Williams, 2011 WL 4018205, at *10 (citing Boone v. City of Philadelphia, 668 F. Supp. 2d 693,

714 (E.D. Pa. 2009)). Accordingly, all the considerations under this factor—whether relief is

adequate—weigh in favor of preliminarily approving the settlement agreement.

d. Whether the proposal treats class members equitably relative

to each other

FLSA and state law class members will receive payments based on the same calculation.

“The settlement share allocation is individually determined based on transactional data from each

Settlement Class Member’s distributorship and the number of weeks each such distributor worked

within the applicable period. (ECF No. 62-1 at 18-19.)” This calculation takes into account both

the estimated overtime and the deductions. Because the proposed settlement treats class members

equitably relative to each other, this factor weighs in favor of preliminary approval.

2. Additional settlement terms

The present settlement agreement includes an arbitration agreement with a class action

waiver as a condition to participating in the settlement. The Court must, therefore, determine

whether the arbitration term is “fundamentally fair, reasonable, and adequate.” Ehrheart v. Verizon

Wireless, 609 F.3d 590, 592 (3d Cir. 2010) (citing Fed. R. Civ. P. 23(e)).

Here, parties assert that they negotiated the terms of the arbitration agreement and that “this

negotiated exchange yeld[ed] an additional fair and reasonable term.” (ECF No. 62-1 at 20.) And,

upon the preliminary review of the arbitration agreement, the Court does not see “grounds to doubt

its fairness or other obvious deficiencies” In re Nat'l Football League Players’ Concussion Inj.

Litig., 301 F.R.D. 191, 198 (E.D. Pa. 2014). The arbitration agreement includes a direct additional

payment of $3,500. Class members will be provided with a one-page summary explaining

arbitration and Class Counsel will be available to fully inform class members about the pros and

cons of arbitration. Moreover, courts in this circuit routinely find arbitration clauses enforceable

in the employment context. See, e.g., Zimmer v. CooperNeff Advisors, Inc., 523 F.3d 224, 229 (3d

Cir. 2008); Blair v. Scott Specialty Gases, 283 F.3d 595, 604 (3d Cir. 2002).

3. FLSA factors

Congress enacted the FLSA to “protect all covered workers from substandard wages and

oppressive working hours[.]” Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 739

(1981). Parties may settle FLSA claims by seeking district court approval. See Kraus v. PA Fit II,

LLC, 155 F. Supp.3d 516. 522 (E.D. Pa. 2016). When evaluating settlements, a court first

determines whether the settlement concerns a “bona fide dispute.” Id. at 523 (quotation omitted).

If a bona fide dispute exists, courts assess whether the settlement is fair and reasonable. See

Kauffman v. U-Haul Int’l, Inc., No. 16-cv-4580, 2019 WL 1785453, at *2 (E.D. Pa. Apr. 24, 2019)

(citation omitted). And finally, courts must ensure that the settlement does not frustrate the

FLSA’s purpose. Id.

“A proposed settlement resolves a bona fide dispute where its terms ‘reflect a reasonable

compromise over issues, such as ... back wages, that are actually in dispute.’” Kraus, 155 F. Supp.

3d. at 523 (quotation omitted). “A dispute is ‘bona fide’ where it involves ‘factual issues rather

than legal issues such as the statute’s coverage and applicability.’” Flores v. Eagle Diner Corp.,

No. 18-cv-1206, 2019 WL 3943355, at * 9 (E.D. Pa. Aug. 21, 2019) (quotation omitted). “[F]or

a bona fide dispute to exist, … there must be evidence of the defendant’s intent to reject or actual

rejection of that claim when it is presented.” Kraus, 155 F. Supp. 3d at 530.

This case presents a bona fide dispute. Plaintiffs (including the Class Reps and opt-in

plaintiffs) submitted a claim for unpaid overtime wages under the FLSA based on Tasty

misclassifying them as independent contractors. Tasty maintains that plaintiffs are independent

contractors and denies the amount claimed as damages. Had this matter not settled, resolution of

these issues would have involved a fact-intensive inquiry. The parties settled this case to avoid the

risks and uncertainty of further litigation.

The settlement is also fair and reasonable. Courts in this circuit have held that the inquiry

into whether a settlement should be approved under the FLSA “largely overlap[s]” with Rule 23

analysis. Williams, No. CIV.A. 10-1044, 2011 WL 4018205, at *9. As explained above, Rule 23

factors support preliminarily approving the proposed settlement.

Finally, the Court must determine whether the proposed settlement furthers or

impermissibly frustrates the implementation of the FLSA in the workplace. Generally, courts find

that all-encompassing release provisions that preclude plaintiffs from raising unrelated claims

against their employer are too broad and frustrate FLSA’s purpose. See, e.g. Solkoff v.

Pennsylvania State Univ., 435 F. Supp. 3d 646, 660 (E.D. Pa. 2020)(“The broad release of claims

that includes unrelated claims and claims unknown to the plaintiff frustrates the purpose of the

FLSA. . . .”); Howard v. Philadelphia Hous. Auth., 197 F. Supp. 3d 773, 779 (E.D. Pa. 2016)(“If

the Court blindly approved the waiver of “any and all Claims” “concerning the termination of

Plaintiff’s employment,” the Court risks judicially endorsing a waiver of Plaintiff’s other

statutorily protected rights. . . . And such judicial endorsement exceeds the court’s judicial

approval role under the FLSA.”). But release provisions that limit future claims to the specific

litigation are sufficiently narrow to pass muster. See, e.g., O’Mara v. Creative Waste Sols., LLC,

No. CV 19-2021, 2020 WL 2513571, at *6 (E.D. Pa. May 15, 2020); Singleton v. First Student

Mgmt. LLC, No. CIV.A. 13-1744 JEI, 2014 WL 3865853, at *9 (D.N.J. Aug. 6, 2014). The release

provision here releases Tasty from any past claims “based on the alleged misclassification [of

collective action and class members] as independent contractors. . . .” (ECF 62-2 at ¶ 3.24.)

Because the release is sufficiently tailored both temporally and factually to Plaintiffs’ allegations

in this litigation, the Court sees no issue with the release provision contained in the proposed

settlement agreement.

Similarly, the arbitration agreement does not frustrate FLSA’s purpose. The Supreme Court

has held that arbitration agreements containing waivers of the right to bring class or collective

actions over employment-related disputes are enforceable under the Federal Arbitration Act. See

Epic Systems Corp. v. Lewis, 138 S. Ct. 1612, 1632 (2018). In doing so, the Court noted that the

FLSA allows agreements for individualized arbitration. See id. at 1626; see also Gaffers v. Kelly

Servs., Inc., 900 F.3d 293, 296 (6th Cir. 2018)(“[B]ecause the FLSA does not “clearly and

manifestly” make arbitration agreements unenforceable, we hold that it does not displace the

Arbitration Act’s requirement that we enforce the employees’ agreements as written.”). Thus, the

Arbitration Agreement is acceptable.

The Court cannot say the same for the confidentiality provision of the settlement

agreement, however. Generally, courts that have considered the issue have concluded that

confidentiality agreements that prohibit plaintiffs from discussing settlement agreements with their

coworkers are too broad and frustrate FLSA’s purpose. Compare Mabry v. Hildebrandt, No. 14-

cv-5525, 2015 WL 5025810, at *2–3 (E.D. Pa. Aug. 24, 2015) (disapproving confidentiality clause

that allowed the plaintiff to disclose terms of agreement only with his “spouse, attorney, and/or

accountant”) and Altenbach v. Lube Ctr., Inc., No. 08-cv-02178, 2013 WL 74251, at *3 (M.D. Pa.

Jan. 4, 2013) (declining to approve settlement agreement prohibiting the plaintiff and class counsel

from disclosing “any specific information concerning the Settlement with the Defendant, such as

the settlement amount, to any person or agency”) with McGee v. Ann’s Choice, Inc., No. CIV.A.

12-2664, 2014 WL 2514582, at *3 (E.D. Pa. June 4, 2014) (approving confidentiality clause that

prohibited the plaintiff from speaking with media but otherwise permitted the plaintiff to share

terms with “friends, family, employees, and individuals not affiliated with the media.”).

The confidentiality agreement here prohibits plaintiffs from “publicizing or disclosing the

specific monetary amounts each individual is to receive under this settlement, either directly or

indirectly, . . . to any media, . . . the public generally, or any individual or entity.” (ECF 62-2 at

¶ 15.12.) In its current state, the confidentiality agreement is too broad because the reference to

“any individual or entity” extends to those that the settlement covers.

District courts reviewing proposed FLSA settlements may require litigants to limit the

scope of the confidentiality agreement. See O’Mara v. Creative Waste Sols., LLC, No. CV 19-

2021, 2020 WL 2513571, at *6 (E.D. Pa. May 15, 2020); see also Bettenger, 2015 W 279754, at

*8. The Court will do so here. Therefore, the Court will approve the settlement only to the extent

that the confidentiality agreement allows plaintiffs to discuss the terms of their settlement with

other Tasty distributors. The Court recognizes that such an approval alters the Parties’ deal, and it

will give the Parties seven days to opt out of their settlement in light of this change.

C. Notice

a. Rule 23(e) Factors

Under Rule 23, “[t]he court must direct notice in a reasonable manner to all class members

who would be bound by the proposal.” Fed. R. Civ. P. 23(e)(1)(B). Such notice

“must clearly and concisely state in plain, easily understood language: (i) the

nature of the action; (ii) the definition of the class certified; (iii) the class claims,

issues, or defenses; (iv) that a class member may enter an appearance through an

attorney if the member so desires; (v) that the court will exclude from the class

any member who requests exclusion; (vi) the time and manner for requesting

exclusion; and (vii) the binding effect of a class judgment on members under Rule

23(c)(3).”

Id.

The parties have agreed on separate notices for: (1) FLSA collective action members; (2)

class members who are not FLSA opt-ins; and (3) distributors who are both state class and FLSA

collective action members. Within this scheme, each proposed notice explains the nature of the

action and the terms of the settlement. Additionally, current distributors’ notice will also include

information about the arbitration and class action waiver agreement. The Court finds that these

essential terms use simple and straightforward language and not legalese. The Court finds that the

notice program is robust and is likely to ensure that all members receive notice of the claims and

their rights with respect to the settlement.

IV. CONCLUSION

The Court will preliminarily approve the settlement, with the confidentiality clause

modified as described. The parties shall have seven days from the date of this decision to inform

the Court that they have opted out of the settlement in light of the Court’s changes. An appropriate

Order follows.

BY THE COURT:

/s/ Joshua D. Wolson

JOSHUA D. WOLSON, J.

April 12, 2021