United States District Court, M.D. Florida, Orlando Division
E. MENDOZA UNITED STATES DISTRICT JUDlE.
CAUSE is before the Court on the Joint Motion for Final
Approval of Settlement (“Joint Motion, ” Doc.
92). United States Magistrate Judge Thomas B. Smith issued a
Report and Recommendation (“R&R, ” Doc. 99),
recommending that the Joint Motion be denied without
prejudice. The Parties filed joint Objections (Doc. 100) to
the R&R. As set forth herein, the Court agrees with Judge
Smith that the Revised Settlement Agreement (Doc. 92-1)
cannot be approved as drafted, and the Joint Motion will be
denied without prejudice.
Amended Complaint (Doc. 90) alleges that Defendants violated
the Fair Labor Standards Act (“FLSA”), 29 U.S.C.
§ 201 et seq., by failing to pay certain
employees required overtime pay. (Doc. 90 ¶¶ 2-3).
This case was conditionally certified as a collective action
under the FLSA, 29 U.S.C. § 216(b), and the class was
defined as “All Social Workers employed by Defendant in
the State of Florida within the three-year period immediately
preceding the filing of this case.” (Nov. 28, 2016
Order, Doc. 36, at 2). In addition to the named Plaintiff,
there are thirty-two other opt-in Plaintiffs. (See
Doc. 98-1 at 9). Ultimately, the parties were able to come to
a resolution of Plaintiffs' claims and filed the Joint
Motion. Judge Smith held a hearing on the matter, (Min.
Entry, Doc. 96), and permitted the parties to file a revised
settlement agreement based on concerns he expressed at the
hearing, (Oct. 3, 2017 Order, Doc. 97, at 1). The parties did
so, and Judge Smith thereafter issued his R&R.
Smith points to several areas of concern in the Revised
Settlement Agreement, including the reasonableness of the
attorneys' fee provision; the requirement that
Plaintiffs' pay any fees and costs in excess of those
paid by the Defendants; the release of claims; the allocation
of mediation costs; the non-publicity clause; and the
retention of jurisdiction provision. (Doc. 99 at 8-16). Each
will be addressed in turn.
Revised Settlement Agreement provides that Defendant will pay
a total of $1, 500, 000.00. (Doc. 98-1 ¶ 1(a)). That
amount is to be distributed as follows: $6, 500.00 paid to
five of the Plaintiffs for their services in participating in
the litigation on behalf of the other Plaintiffs,
(id. ¶ 1(a)(1)); $976, 000.00 to Plaintiffs as
payment for back wages and liquidated damages, (id.
¶ 1(a)(2)); $500, 000.00 in attorneys' fees,
(id. ¶ 1(a)(3)); and $17, 500.00 for costs,
(id.). With regard to the attorneys' fees and
costs, the provision further states that the
“[a]ttorneys' fees were separately
first issue raised by Judge Smith is whether the amount of
attorneys' fees is reasonable. The parties cite
Bonetti v. Embarq Management Co., 715 F.Supp.2d
1222, 1228 (M.D. Fla. 2009), which suggests that courts
should approve FLSA settlement agreements “without
separately considering the reasonableness of the fee to be
paid to plaintiff's counsel” where the settlement
agreement “(1) constitutes a compromise of the
plaintiff's claims; (2) makes full and adequate
disclosure of the terms of settlement, including the factors
and reasons considered in reaching same and justifying the
compromise of the plaintiff's claims; . . . (3)
represents that the plaintiff's attorneys' fee was
agreed upon separately and without regard to the amount paid
to the plaintiff, ” and (4) “the settlement does
not appear [un]reasonable on its face [and] there is [no]
reason to believe that the plaintiff's recovery was
adversely affected by the amount of fees paid to his
attorney, ” id. at 1228. The parties contend
that their settlement meets all of these factors.
Smith concluded that, despite the parties' argument to
the contrary, the attorneys' fees were not separately
negotiated. He concluded that the very fact that the amount
of the attorneys' fee was contingent on the amount
Plaintiffs recovered meant that the fees could not have been
separately negotiated. This Court agrees with Judge Smith.
parties' own representation, the amount of attorneys'
fees was directly dependent on the amount of Plaintiffs'
recovery. This cannot be reconciled with the concept of
“separately negotiated.” Plaintiffs appear to
argue that because the percentage-thirty percent-was
negotiated at the beginning of the litigation without
Plaintiffs' counsel knowing what the ultimate recovery
was going to be, it was separately negotiated. This type of
“separate negotiation” is not what is
contemplated in Bonetti. There, Judge Presnell
reasoned that where the parties separately determine what is
a reasonable payment to the plaintiff and what-wholly apart
from the plaintiff's payment-is a reasonable
attorneys' fee in a particular case, then there is a
minimal chance that the attorneys' fees impacted the
plaintiff's recovery, and therefore, a less in-depth
review is necessary. See Id. at 1228. Indeed,
Bonetti itself differentiates between a separate
negotiation and a contingency fee situation. See Id.
at 1226 (distinguishing Eleventh Circuit precedent that
addresses contingency fee arrangements).
parties argue that this is not a contingency fee case-it is a
common fund case. But for purposes of the separately
negotiated analysis, such a distinction makes no difference.
In both types of cases, the amount of attorneys' fees are
directly contingent on the amount of the plaintiffs'
recovery, which is the problematic element. The
attorneys' fee cannot be separately negotiated if it is
derived from the amount of Plaintiffs' recovery.