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Doe v. Deja Vu Consulting, Inc.

United States District Court, E.D. Michigan, Southern Division

June 19, 2017

JANE DOE 1-2, individually and on behalf of all others similarly situated, Plaintiffs,
DEJA VU SERVICES, INC., et al., Defendants.


          STEPHEN J. MURPHY, III United States District Judge

         In a collective and class action complaint, Plaintiffs Jane Doe 1 and 2 alleged that Defendants Deja Vu Services, Inc., DV Saginaw, LLC, Harry Mohney, and Deja Vu affiliated nightclubs violated of the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201, state wage and hour laws, and the California Business and Professions Code. ECF 33. The Court granted preliminary approval of the parties' proposed class settlement, to which six class members objected. The Court held a Fairness Hearing and heard arguments from the parties and two of the objectors. For the reasons stated below, the Court will overrule the objections, grant the Motion for Final Approval of Settlement, and grant the Amended Motion for Attorney Fees and Costs.


         The dispute between Plaintiffs and Defendants dates back nine years. See Jane Doe v. Cin-Lan, Inc., 2:08-cv-12719 (E.D. Mich. July 15, 2011). Cin-Lan involved nearly the same defendants, claims, and proposed settlement, and many of the same class members. After three years of highly contested litigation, the Cin-Lan parties proposed a class settlement. The Court in Cin-Lan held a fairness hearing, id. at ECF 402, granted final approval, and retained jurisdiction to enforce the settlement, id. at ECF 430.

         Five years later, Plaintiffs filed this class and collective action suit alleging violations of the FLSA and state wage and hour laws. See Compl., ECF 1; Am. Compl., ECF 33. Specifically, Plaintiffs alleged that Defendants intentionally misclassified class members as independent contractors, refused to pay minimum wage, unlawfully required employees to split gratuities, and unlawfully deducted employee wages through rents, fines, and penalties. Defendants filed a motion to dismiss or stay. ECF 12. They argued that the named Plaintiff's contract mandated binding arbitration. Id. Six months ago, the parties reached a settlement and filed a motion to transfer the case to this Court, because the proposed settlement affected the parties' rights and obligations under the Cin-Lan settlement. ECF 22.


         Federal Rule of Civil Procedure 23(e) requires parties to obtain court approval of class-action settlements. Approval is a three-step process: "(1) the court must preliminarily approve the proposed settlement, i.e., the court should determine whether the compromise embodied in the decree is illegal or tainted with collusion; (2) members of the class must be given notice of the proposed settlement; and (3) a hearing must be held to determine whether the decree is fair to those affected, adequate and reasonable." Tenn. Ass'n of Health Maint. Orgs., Inc. v. Grier, 262 F.3d 559, 565-66 (6th Cir. 2001).

         On February 7, 2017, the Court granted preliminary approval to the proposed settlement, ECF 31, because it suffered from no obvious deficiencies and appeared to fall within "the range of possible approval." In re Packaged Ice Antitrust Litig., No. 08-MD-01952, 2010 WL 3070161, at *4 (E.D. Mich. Aug. 2, 2010) (quoting Manual for Complex Litigation s 1.46, at 53-55 (West 1981)).The Court's order instructed the parties to send out notice to inform the class of the proposed settlement no later than February 28, 2017. ECF 31. Also, the notices advised class members that the Court would hold a the fairness hearing on June 6, 2017 at 2:00 p.m. ECF 34-5.

         After the Plaintiffs filed a Motion for Final Approval of Settlement, ECF 41, and an Amended Motion for Attorney Fees and Costs, ECF 43, the Court received five objections: from C.T. (represented by W. Allen McDonald), B.D (represented by Daniel Arciniegas), Eva Cabrera and Brittney Halverson (represented by Guy Conti and Harold Lichten), Stephanie Sage (not represented by counsel), and Merry Clark (also not represented by counsel). On June 6, 2017, the Court held a fairness hearing and heard arguments from the parties and from attorneys Lichten and Arciniegas.

         I. Certification of the Settlement Class is Appropriate

         As noted in the order granting preliminary approval, the parties seek certification of a settlement class that includes "[a]ll current and former entertainers who worked for Defendants at any time during the Class Period and today's date at any of the Déjà Vu affiliated clubs[.]" ECF 31, PgID 718; see also ECF 34-2 (listing 64 "Deja Vu affiliated clubs"). The "class period" begins on the date when each class member's state wage and hour claim statute of limitations period began to run prior to March 10, 2016. ECF 34-1.

         The proposed class meets the requirements of Federal Rule of Civil Procedure 23(a): numerosity ("the class [must be] so numerous that joinder of all members is impracticable"), commonality ("there [must be] questions of law or fact common to the class"), typicality ("the claims or defenses of the representative parties [must be] typical of the claims or defenses of the class"), and adequacy of representation ("the representative parties [must] fairly and adequately protect the interests of the class"). Bacon v. Honda of Am. Mfg., Inc., 370 F.3d 565, 569 (6th Cir. 2004)

         First, the class consists of 28, 177 members; that fact makes joinder of all class members impracticable. See Id. at 570 (holding that the "sheer number of potential litigants in a class, especially if it is more than several hundred, can be the only factor needed to satisfy" the numerosity requirement). Second, a common legal question applies to each of the class members' claims: whether Defendants misclassified class members as independent contractors. That question is "central to the validity of each one of the claims" of the class members under any of the applicable state wage and hour laws. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011). Third, the class representatives' claims satisfy the typicality requirement because they "stem from a single event or a unitary course of conduct, or . . . are based on the same legal or remedial theory"-namely, the Defendants' business practices of classifying workers as independent contractors. Rikos v. Procter & Gamble Co., 799 F.3d 497, 509 (6th Cir. 2015), cert. denied, 136 S.Ct. 1493 (2016).

         Fourth, to determine adequacy of representation, "[t]he representative must have common interests with unnamed members of the class, and . . . it must appear that the representatives will vigorously prosecute the interests of the class through qualified counsel." Vassalle v. Midland Funding, LLC, 708 F.3d 747, 757 (6th Cir. 2013). Both requirements are met here: class representatives raise FLSA and wage and hour claims common to the class, and they have pursued their claims with the assistance of experienced and qualified counsel.

         Finally, the Court looks to Federal Rule of Civil Procedure 23(b)(3). That rule permits a class action if "the court finds that the questions of law or fact common to class members predominate over any questions affecting individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." The requirement is met here because "the issues subject to generalized proof"-whether Defendants correctly classified class members performing similar work in similar circumstances as independent contractors-"predominate over those issues that are subject to only individualized proof." Young v. Nationwide Mut. Ins. Co., 693 F.3d 532, 544 (6th Cir. 2012).

         II. The Settlement Class Received Adequate Notice

         Federal Rule of Civil Procedure 23(e)(1) and (2) require that class members receive reasonable and adequate notice of a proposed class settlement. The class consists of 28, 177 members. At the fairness hearing, the parties stated that 24, 575 notices were delivered, 4, 623 class members have opted in to the proposed settlement, and 66 class members opted out of the proposed settlement. Also, the Plaintiffs certified that notice had been provided in accordance with the Court's preliminary approval order. The notices stated-in clear and easily understandable terms-the key information class members needed to make an informed decision: the nature of the action, the class claims, the definition of the class, the general outline of the settlement, how to to elect for a cash payment, how to opt out of the class, how to object to the settlement, the right of class members to secure counsel, and the binding nature of the settlement on class members who do not to opt out. ECF 34-5.

         In another notice-related provision, Federal Rule of Civil Procedure 23(e)(5) provides that "[a]ny class member may object to the proposal if it requires court approval under this subdivision (e); the objection may be withdrawn only with the court's approval." Accordingly, the notices advised that class members who filed timely objections to the settlement could voice their objections at the June 6 fairness hearing. ECF 34-5. Also, the notices stated that class members had 95 days from the Court's preliminary approval order-until May 13th-to object or opt out of the class. See ECF 31, PgID 720. In addition, the parties took additional steps to provide notice to class members, including through targeted advertisements on social media. ECF 66, PgID 2061.The Court finds that the parties have provided the "best notice that is practicable under the circumstances, " Fed.R.Civ.P. 23(c)(2)(B), and complied with the requirements of the Federal Rules of Civil Procedure, the Class Action Fairness Act of 2005, and due process.

         III. The Proposed Class Settlement is Fair, Reasonable, and Adequate

         Under Federal Rule of Civil Procedure 23(e)(2), "the court may approve [a settlement that would bind class members] only after a hearing and on finding that it is fair, reasonable, and adequate." To determine whether the proposed settlement meets the requirements of Rule 23, the Court considers seven factors: "(1) the risk of fraud or collusion; (2) the complexity, expense and likely duration of the litigation; (3) the amount of discovery engaged in by the parties; (4) the likelihood of success on the merits; (5) the opinions of class counsel and class representatives; (6) the reaction of absent class members; and (7) the public interest." Int'l Union, UAW v. Gen. Motors Corp., 497 F.3d 615, 631 (6th Cir. 2007).

         "[I]n class-action settlements the district court cannot rely on the adversarial process to protect the interests of the persons most affected by the litigation-namely, the class." In re Dry Max Pampers Litig., 724 F.3d 713, 718 (6th Cir. 2013). As a result, the Court must "carefully scrutinize" a class settlement to ensure that class counsel and representatives meet their "fiduciary obligations" to the class. Id. As proponents of the settlement agreement, the parties bear the burden to prove that the proposed settlement agreement is fair. Id. at 719.

         A. Likelihood of Success on the Merits

         A district court "cannot judge the fairness of a proposed compromise without weighing the plaintiff's likelihood of success on the merits against the amount and form of the relief offered in the settlement." UAW, 497 F.3d at 631 (quotations omitted). Thus, "the district court must specifically examine what the unnamed class members would give up in the proposed settlement, and then explain why-given their likelihood of success on the merits-the tradeoff embodied in the settlement is fair to unnamed members of the class." Shane Grp., Inc. v. Blue Cross Blue Shield of Mich., 825 F.3d 299, 309 (6th Cir. 2016).

         The major point of contention between the parties and the objectors is whether the settlement adequately compensates class members for release of their claims. Under the terms of the settlement, all the opt-in class members release their FLSA claims, and all class members-except those who opted out-release their state-wage-and-hour claims.ECF 34-1, PgID 861. To estimate the value of those claims, the parties provided a damages model for a typical class member. ECF 66-7. The model shows a rough approximation of the hours worked over a three-year period based on data from a named class representative. Although far from ideal, the Court finds the damage model useful to determine class members' range of possible recovery. According to the model, the possible damages for a frequent worker in the class range from $443.08 to $6, 006.70 per year of employment, depending ...

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