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Johnson v. Steak N Shake Operations, Inc.

United States District Court, M.D. Florida, Orlando Division

January 3, 2018

REBECKA JOHNSON, Plaintiff,
v.
STEAK N SHAKE OPERATIONS, INC., Defendant.

          REPORT AND RECOMMENDATION

          KARLA R. SPAULDING UNITED STATES MAGISTRATE JUDGE

         TO THE UNITED STATES DISTRICT COURT:

         This cause came on for consideration without oral argument on the following motions filed herein:

MOTION: JOINT MOTION FOR A FAIRNESS FINDING, APPROVAL OF SETTLEMENT, AND DISMISSAL WITH PREJUDICE (Doc. No. 50)
FILED: August 24, 2017
MOTION: JOINT MOTION TO REFORM SETTLEMENT
AGREEMENT AND ENFORCE SETTLEMENT (Doc. No. 58)
FILED: November 26, 2017

         I. BACKGROUND.

         I have previously reviewed the history of this case. Doc. No. 48. Because the procedural history of this case is complicated, I again review the history of this case in detail here.[1]

         Plaintiff, Rebecka Johnson, filed a complaint in state court against Defendant, Steak N Shake Operations, alleging that Defendant failed to pay her overtime wages in violation of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq.; failed to pay her minimum wages in violation of the Florida Minimum Wage Act, Fla. Stat.§ 448.110; and failed to pay her wages in violation of Florida Constitution Article X, § 24(c). Doc. No. 2. Defendant removed the case to this Court on January 25, 2016.

         Defendant served an Offer of Judgment on Plaintiff. Doc. No. 37-1. In the Offer of Judgment, Defendant offered to pay Plaintiff $2, 500 if Plaintiff executed a proposed settlement agreement and dismissed with prejudice her claims against Defendant. Defendant also agreed that it would pay Plaintiff a reasonable sum for the recovery of attorneys' fees and costs and, if agreement could not be reached, that the Court would be asked to determine the reasonable sum to be paid. Id. Plaintiff timely accepted the offer on March 30, 2017. Doc. No. 37-2.

         On May 5, 2017, Plaintiff filed a notice of voluntary dismissal with prejudice except as to the issue of attorneys' fees and costs. Doc. No. 32. I struck the notice because Defendant had filed an answer and, therefore, Plaintiff could not voluntarily dismiss the case under Federal Rule of Procedure 41(a)(1)(A)(i). Doc. No. 33.

         On May 10 and 11, 2017, the parties executed the settlement agreement contemplated by the Offer of Judgment. Doc. No. 50-1 (“May 2017 Settlement Agreement”). The May 2017 Settlement Agreement called for Plaintiff to receive $2, 500 divided into two payments of $1, 250. In keeping with the terms of the Offer of Judgment, it did not address the issue of attorneys' fees and costs. Id. On May 17, 2017, the parties filed a joint stipulation of dismissal with prejudice except as to the issue of Plaintiff's attorneys' fees. Doc. No. 34. On May 22, 2017, Plaintiff also filed a motion for attorneys' fees and costs. Doc. No. 37. On May 26, 2017, I held a hearing on the joint stipulation of dismissal, noting that the self-executing stipulation of dismissal did not likely result in Plaintiff being entitled to an award of attorneys' fees under the FLSA or Florida law. Doc. No. 35; see also Doc. Nos. 40, 41. Following the hearing, I denied Plaintiff's motion for attorneys' fees without prejudice. Doc. No. 41.

         On June 1, 2017, Defendant transmitted the settlement payment of $2, 500 to Plaintiff's counsel. Doc. No. 58-2. It appears that Plaintiff's counsel transmitted that payment to Plaintiff, and she has never returned the funds to Defendant.

         On June 15, 2017, Plaintiff filed a motion to withdraw the joint stipulation for dismissal. Doc. No. 44. That motion was granted on August 21, 2017. Doc. No. 49. In granting the motion, the Court ordered the parties to file a motion requesting that the Court approve their settlement in accordance with Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir. 1982), no later than August 31, 2017. Id.

         On August 24, 2017, the parties filed the currently-pending Joint Motion for a Fairness Finding, Approval of Settlement, and Dismissal with Prejudice. Doc. No. 50. In the motion, the parties sought approval of their settlement. The attorneys also informed they Court that they had reached a resolution on the issue of Plaintiff's attorneys' fees and costs. Specifically, Defendant had agreed to pay Plaintiff's counsel $5, 000 in full resolution of Plaintiff's claims for attorneys' fees and costs. Id. The parties attached the May 2017 Settlement Agreement to their motion. Doc. No. 50-1. As explained above, that settlement agreement does not include the agreement to pay $5, 000 in attorneys' fees. On August 30, 2017, I entered a supplemental briefing order. Doc. No. 51. I required the parties to address several issues, including: (1) whether Plaintiff had compromised her FLSA claim and, if so, to what extent; and (2) why the scope of the release contained in the settlement agreement (which runs to individuals and entities who are not parties to this case and releases claims other than the wage claims raised in the complaint) does not undermine the fairness of the agreement. I also required Defendant's counsel to represent that they had received the settlement funds in their trust account and would disburse those funds upon a favorable ruling by the Court. Id.

         The parties twice requested extensions of time to provide the requested information. Doc. Nos. 52, 56. In those motions, they represented that they planned to draft a new settlement agreement that addressed my concerns and have Plaintiff execute that revised agreement. Doc. No. 52. They also explained that Plaintiff's counsel had been attempting to have Plaintiff sign the new agreement but she had not yet done so. Id.

         On November 26, 2017, counsel for the parties filed the currently-pending Joint Motion to Reform Settlement Agreement and Enforce Settlement. Doc. No. 58. In the motion, they explained that Plaintiff's counsel had repeatedly attempted to have Plaintiff sign the revised settlement agreement. Nonetheless, she did not do so and, around October 20, 2017, stopped communicating with Plaintiff's counsel. Accordingly, counsel asked the Court to “reform” the parties' settlement agreement to contain only terms that are legally enforceable and approve the terms of that settlement. Defendant's counsel also represented that they had received the $5, 000 in attorneys' fees from Defendant and would disburse those funds to Plaintiff's counsel upon a favorable ruling from the Court.

         Both motions were referred to me, and they are ripe for adjudication.

         II. JOINT MOTION TO REFORM SETTLEMENT AGREEMENT AND ENFORCE SETTLEMENT.

         As explained above, the parties executed a settlement agreement on May 10 and 11, 2017. That May 2017 Settlement Agreement disposed of Plaintiff's FLSA claims, but it did not address Plaintiff's claims for attorneys' fees. It also included a release that was arguably too broad. Counsel drafted a revised settlement agreement that addressed these issues. Plaintiff's counsel was, however, unable to obtain Plaintiff's signature on the revised settlement agreement. As a result, counsel ask the Court to essentially re-write the May 2017 Settlement Agreement (which was signed by Plaintiff) to reflect the revised terms and enforce the agreement as revised. The problem with this approach, at least as to the attorneys' fees award, is that the record does not include any evidence that Plaintiff ever agreed to the $5, 000 amount.[2] Because, as discussed below, Plaintiff has significantly compromised her claim, her assent to the amount of attorneys' fees is not something the Court can simply overlook. See Silva v. Miller, 307 F. App'x 349, 351 (11th Cir. 2009) (per curiam) (cited as persuasive authority) (“[The] FLSA requires judicial review of the reasonableness of counsel's legal fees to assure both that counsel is compensated adequately and that no conflict of interest taints the amount the wronged employee recovers under a settlement agreement.”). Without Plaintiff's assent, I cannot, as counsel requests, recommend that the Court “enforce” the agreement to the $5, 000 in fees. Accordingly, I recommend that the Court DENY the Joint Motion to Reform Settlement Agreement and Enforce Settlement (Doc. No. 58).

         That said, Plaintiff agreed to have the amount of attorneys' fees be determined by the Court when she accepted the Offer of Judgment. Doc. No. 37-1. It also appears that, despite a previous motion claiming in excess of $20, 000 in fees, Plaintiff's counsel has agreed to accept $5, 000 and Defendant has agreed to pay that amount. Based on these facts, I will first discuss whether the original settlement agreement signed by Plaintiff (the “May 2017 Settlement Agreement”) with recommended revisions is fair and reasonable. I will then address whether the separate agreement to pay $5, 000 in attorney's fees taints the Settlement Agreement. Cf. Bonetti v. Embarq Mgmt. Co., 715 F.Supp.2d 1222, 1228 (M.D. Fla. 2009) (“[I]f the parties can only agree as to the amount to be paid to the plaintiff, the Court will continue the practice of determining a reasonable fee using the lodestar approach.”).

         III. JOINT MOTION FOR A FAIRNESS FINDING, APPROVAL OF SETTLEMENT, AND DISMISSAL WITH PREJUDICE.

         A. Applicable Law.

         In Lynn's Food, the U.S. Court of Appeals for the Eleventh Circuit explained that claims for compensation under the FLSA may only be settled or compromised when the Department of Labor supervises the payment of back wages or when the district court enters a stipulated judgment “after scrutinizing the settlement for fairness.” 679 F.2d at 1353. Under Lynn's Food, a court may only enter an order approving a settlement if it finds that the settlement is fair and reasonable, Dees v. Hydradry, Inc., 706 F.Supp.2d 1227, 1240 (M.D. Fla. 2010), and that the ensuing judgment is stipulated, Nall v. Mal Motels, Inc., 723 F.3d 1304, 1308 (11th Cir. 2013).

         When a settlement agreement includes an amount to be used to pay attorneys' fees and costs, the “FLSA requires judicial review of the reasonableness of counsel's legal fees to assure both that counsel is compensated adequately and that no conflict of interest taints the amount the wronged employee recovers under a settlement agreement.” Silva, 307 F. App'x at 351. If the Court finds that the payment to the attorney is not reasonable, it must consider whether a plaintiff's recovery might have been greater if the parties had reduced the attorneys' fees to a reasonable amount. See Id. at 351-52; see also Bonetti, 715 F.Supp.2d at 1228 (finding that the Court must consider the reasonableness of attorneys' fees when a “settlement does not appear reasonable on its face or there is reason to believe that the plaintiff's recovery was adversely affected by the amount of fees paid to his attorney”). If the parties agree only on the amount to be paid to the plaintiff, the Court determines a reasonable fee using the lodestar approach. Bonetti, 715 F.Supp.2d at 1228.

         B. ...


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