Judge Recommends Scam Class Action Settlement Site Be Shut Down

By Gerald L. Maatman, Jr. and Christian J. Palacios

Duane Morris Takeaways:  U.S. Magistrate Judge Joseph Marutollo’s recent report and recommendation – a novel order in the context of class action settlements – in the proceeding captioned In Re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, Case No. 1:05-MD-01720, Doc. No. 9009 (E.D.N.Y. Nov. 28, 2023), highlights the risks associated with class action claims websites and the potential for bad actors to create fraudulent web pages to mislead claimants. Corporate defendants should take care to monitor online activity following the creation of a court-authorized settlement website in order to protect any class-wide settlement and claimants against potential fraudsters. Indeed, in a world where scammers are becoming increasingly more sophisticated through the use of technology, class action settlement websites may be the next frontier in the battle against cybercrime.

Background

After 15 years of contentious litigation, Visa and MasterCard settled a putative class action for $5.6 billion to resolve allegations that the credit card companies violated federal and state antitrust laws resulting in over 12 million merchants allegedly paying excessive fees to Visa and MasterCard. As is typical in class actions of this size, a court-authorized settlement website was created to accept claim submissions and provide claimants with details regarding the settlement agreement.

On November 28, 2023, Magistrate Judge Marutollo recommended that the Court order the website “settlement2023.org” (and any affiliate website) be taken down, as the operators of the Settlement2023.org entity, who remain unknown, were attempting to deceive putative class members into using the site through various schemes, including using fake voicemails from rap artist Snoop Dogg to convince users of its validity.   According to Magistrate Judge Marutollo’s report, although the scam website ceased operation on November 21, 2023, it was unclear if other webpages remained open under different domain names that were also operated by the Settlement2023.org entity.

The Magistrate Judge’s Recommendation And Report

In addition to recommending the Court issue an order to take down of any and all remaining webpages that attempt to mimic the court-authorized settlement website, Magistrate Judge Marutollo also recommended that the owners and operators of the Settlement2023.org entity be required to identify themselves, and provide a list of all class members that signed up for its services, as well as give notice to would-be customers that any contract they entered into with the entity was now void.  Finally, the Magistrate Judge requested that the Court be notified of any newly-detected websites and recommended that the court-authorized website be updated to alert those who may have been deceived by the settlement2023.org website.

Implications

Cybercriminals continue to capitalize on advances in technology to launch misinformation campaigns, and large class action settlements are in the cross-hairs of this emerging threat. Therefore, it is imperative that plaintiff and defendant-side representatives alike remain vigilant to protect class members from deception and safeguard the integrity of the class action settlement process.

Eleventh Circuit Affirms Blue Cross Blue Shield Insurers’ $2.67 Billion Class Action Settlement

By Gerald L. Maatman, Jr. and Sean P. McConnell

Duane Morris Takeaways: On October 25, 2023, in the litigation of In Re Blue Cross Blue Shield Antitrust Litigation, MDL No. 2406 (11th Cir. Oct. 25, 2023), a three-judge panel of the U.S. Court of Appeals for the Eleventh Circuit affirmed a district court’s order giving approval to the Blue Cross Blue Shield insurers’ $2.67 billion class action settlement resolving allegations of antitrust violations and other anti-competitive practices. The settlement, which was reached nearly three years ago, involved Blue Cross Blue Shield agreeing to a multi-billion dollar settlement fund and incorporating various reforms to resolve alleged anti-competitive business practices to harm competition. The Eleventh Circuit rejected various objections from corporate and individual objectors, including arguments that the settlement release would frustrate national employers from participating in the settlement and/or from making similar claims in the future, that the district court failed to scrutinize the allocation of the settlement proceeds among plaintiffs, and issues with the attorneys’ fees awarded. Instead, the Eleventh Circuit found that the district court did not abuse its discretion in approving the settlement.

The affirmation of the district court’s settlement approval in Blue Cross Blue Shield Antitrust Litigation is required reading for any corporate counsel considering settlement of antitrust class action litigation.

Case Background

The underlying multidistrict litigation began in 2012 when subscribers alleged that Blue Cross Blue Shield and member plans engaged in an anti-competitive market allocation and exclusive-dealing scheme to harm competition. The Blue Cross Blue Shield Association is a national insurance company. It owns and licenses its federal trademarks to local member plans and affiliated entities. According to the underlying complaint, subscribers who bought health insurance from Blue Cross Blue Shield alleged that Blue Cross Blue Shield allocated geographic territories, limited member plans’ competition by mandating a minimum percentage of business under the Blue Cross brand for each member doing business inside and outside their territories, restricted the right of member plans to be sold to companies outside the Association, and agreed to other ancillary restraints on competition. There was a separate track of litigation for claims brought by providers, but the case at bar does not involve that track. After the district court granted partial summary judgment for the subscribers in 2018, the parties reached a class action settlement that divided the subscriber-track plaintiffs into two groups: (i) a monetary damages class and (ii) an injunctive relief class.

Settlement Affirmed

Several parties appealed the district court’s approval of the class action settlement.  Home Depot argued that the settlement release would, among other things, frustrate enforcement of the federal antitrust laws. The Eleventh Circuit rejected this argument because “[p]rivate enforcement is only one mechanism by which federal antitrust laws may be vindicated.” Id. at 13. The Eleventh Circuit noted that the “government may also enforce the antitrust laws against companies like Blue Cross” and intimated that DOJ or state attorneys general could investigate and bring claims against Blue Cross for anticompetitive conduct. Id. at 13-15. With respect to argument about the apportionment of settlement funds, the Eleventh Circuit opined that federal laws requires “equity, not equality.” Id. at 25. It therefore concluded that the approval of the class-wide settlement, though facially unequal, was not unfair and not an abuse of discretion.

Implications for Defendants in Class Actions

In Re Blue Cross Blue Shield Antitrust Litigation is one of the most significant antitrust class actions in recent years, and is arguably a historic resolution in terms of industry practices. From the early stages of the action, a court-appointed settlement master helped the parties in settlement negotiations, and the Eleventh Circuit referred to the settlement master’s view that the settlement at issue was reasonable.

New York Federal Court Approves Unique Wage Case Settlement Structure Providing Plaintiff-Employee A Discounted Purchase Price For Employer’s Entire Business

By Gerald L. Maatman, Jr., Gregory S. Slotnick, and Maria Caceres-Boneau

Duane Morris TakeawaysPursuant to Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015), the practice of settling lawsuits filed in district courts in the Second Circuit alleging unpaid wages under the Fair Labor Standards Act (“FLSA”) requires approval from either the Court or the U.S. Department of Labor to take effect.  On September 14, 2023, Magistrate Judge James M. Wicks of the U.S. District Court for the Eastern District of New York approved a rather unique settlement request by the parties in such an unpaid wage case.  Although nearly all wage & hour lawsuit settlements in the Second Circuit ultimately conclude with the business-employer defendant agreeing to pay a monetary amount in exchange for dismissal of the case and a release of the employees’ wage claims against the employer, in Gallagher v. Mountain Mortgage Corp. et al., Case No. 22-CV-0715 (E.D.N.Y. Sept. 14, 2023), the Court evaluated and signed-off on the parties’ proposed settlement structure whereby the plaintiff-employee, who worked as a loan processor and mortgage loan originator for a mortgage lender, agreed to resolve the matter in exchange for her receipt of a heavily-discounted purchase price and her agreement to buy the business itself.  The Court’s decision serves as an interesting thought exercise for resolving unpaid wage lawsuits through unorthodox strategies, though potentially applicable only in particular circumstances under which the Court may find such resolution fair and reasonable.

Case Background

According to the Complaint, plaintiff-employee Nicole Gallagher (“Gallagher”) has over 25 years of experience in the mortgage banking industry and is licensed to originate mortgage loans in New York, New Jersey, Connecticut, and Florida.  Gallagher alleged that she worked for a mortgage lender, Mountain Mortgage Corp. (“MMC”), for a little over a year and claimed that despite working around 85 hours per week, MMC did not pay her at all during certain months, never paid her overtime despite consistently working over 40 hours per week, and failed to provide her with accurate paystubs and weekly earnings statements or with a notice and acknowledgment of her pay rate as required by law.  Specifically, Gallagher asserted that MMC paid her a set weekly salary and no overtime during the entire year of 2021, and that MMC did not compensate her at all during November and December 2020 or at any time in 2022.  MMC claimed that at all relevant times, it understood that Gallagher was not an hourly employee, but instead “was an owner and officer” of MMC who was to be paid by commission no differently than other previously employed salespersons of MMC.

Magistrate Judge Wicks’ opinion noted that, prior to the filing of the lawsuit, Gallagher and MMC had entered into a purchase agreement whereby Gallagher was to purchase MMC for $500,000.  The parties informed the Judge that Gallagher was employed at MMC in advance of her anticipated purchase of MMC, but that when no successful application for a change in ownership of MMC was submitted to the New York State Department of Financial Services by the deadline contemplated in the purchase agreement, the parties’ relationship soured, resulting in Gallagher filing the lawsuit.

As part of the lawsuit, the parties previously submitted a request for the Judge’s approval of a settlement on May 6, 2022, whereby Gallagher would purchase MMC for $100,000 rather than the $500,000 contemplated in the original purchase agreement.  Judge Wicks ultimately denied the parties’ first request for settlement approval due to what he deemed to be a lack of essential information required for the Court to evaluate whether the proposed agreement was fair and reasonable as required by Cheeks.  Such information included the bona fide details of the parties’ FLSA dispute, calculations of Gallagher’s potential recovery, and an explanation of what portion of the reduced purchase price of MMC constituted consideration for Gallagher’s FLSA claims.  The decision of September 14 addressed the parties’ submission of a renewed settlement approval request.

The Decision

As noted by Magistrate Judge Wicks, in support of the parties’ renewed settlement agreement approval request, the parties aimed to kill two bird with one stone – resuscitate the parties’ failed transaction and settle Gallagher’s wage & hour claims against MMC.  Id. at 6.  This time around, Gallagher submitted detailed information to the Court concerning her purported unpaid wage damages, which she alleged to be approximately $295,000.  This figure included alleged “underpayments, liquidated damages, pre-judgment interest, and penalties” owed to her by MMC.  Id. at 4.  Gallagher also provided the Court with the specific details of her alleged employment, including time periods, weekly hours worked, regular rate of pay, and periods during which she claims that she did not receive proper compensation.

Magistrate Judge Wicks noted that under the original settlement approval request, he had been unable to determine which portion of the $400,000 reduction in MMC’s purchase price, if any, was consideration for the release of Gallagher’s FLSA claims, and which portion was attributable to other factors.  As part of the renewed approval request, Gallagher informed the Court that no formal valuation was conducted to reach the original $500,000 purchase price, and that her reduced purchase price of $100,000 was similarly not calculated based on a formal valuation.  Instead, both figures were the product of advice from her attorneys, her experience in the industry, and her “sense of the value” of the mortgage banking licenses (whereby MMC’s New York Mortgage Banker’s license was in the process of being surrendered).  Id. at 5.  Gallagher submitted that she was unable to “break down exactly” what portions of the reduced purchase price were attributable to what specific single factor; however, in her view, the value of her FLSA claims and the loss of MMC’s New York license were both factors that were “in the mix” along with her desire to own MMC outright, avoid costly arbitration, avoid the stress and expense of the lawsuit, and generally “just move on” with her life.  Id. at 5-6.

In evaluating and approving the renewed settlement request, Magistrate Judge Wicks noted his satisfaction with the fairness of the proposed settlement, giving due weight to Gallagher’s more than 25 years of experience in the mortgage banking industry and the fact that Gallagher herself worked at MMC with the intention of inevitably owning it (as opposed to a disinterested third-party purchase of a business).  As such, although there was no formal valuation of MMC’s value conducted, Judge Wicks acknowledged that Gallagher’s experience and familiarity with the business was relevant to her comfort level with the reduced purchase price.  The Court also gave weight to Gallagher’s desire to move on with her life and put these issues behind her.

Magistrate Judge Wicks further cited the fact that Gallagher now owns 100% of MMC, and that a trial loss should he not approve the settlement could potentially turn her status as 100% owner into a 0% owner with no remaining claims against MMC.  The Court noted that no settlement amount was earmarked for payment of attorneys’ fees, as all of Gallagher’s attorneys except for one were paid on an hourly basis (rather than a contingency), that the one exception only represented Gallagher briefly and was replaced within 3 months of filing the case, and the attorney had not expressed any intention of asserting a lien over the reduced purchase price of MMC.

Based on all of these factors, the Court finally confirmed that the renewed settlement agreement properly revised and limited two troublesome provisions concerning non-disparagement and confidentiality – both of which are regularly found by courts to be inconsistent with the public policy intent underlying the FLSA.

Implications for Employers

The decision is an interesting thought experiment for small employers who are subject to unpaid wage lawsuits brought on behalf of a small number of plaintiffs.  In this instance, the parties agreed that rather than separate Gallagher’s desire to purchase MMC and her alleged unpaid overtime wages and related penalties, a more logical solution was to combine the two and provide for one global resolution.  Creative, innovative thinking along these lines likely saved MMC from incurring additional litigation expenses and the unknown of a jury trial verdict.  Moreover, the parties ultimately were able to provide the Court with evidence from which the settlement could be deemed fair and reasonable.

Although potentially limited to specific factual situations along the lines of an experienced employee initially employed by a small business with the goal of owning the business, this decision illustrates that in evaluating the reasonableness of proposed unpaid wage case settlements, judges may be open to approving agreements when the parties think outside the box (as long as the parties are able to defend and support their actions).

The Class Action Weekly Wire – Episode 28: Top Settlements In Class Action Litigation In 2022 & 2023

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partners Jerry Maatman and Jennifer Riley with their analysis of significant class action settlements throughout 2022 and a preview settlement trends in 2023.

Episode Transcript

Jerry Maatman: Hello loyal blog readers and thank you for joining our weekly installment of the Class Action Weekly Wire. Today I’m joined by my partner Jen Riley, the co-chair of the Duane Morris Class Action Practice Group. Thanks for being on our podcast today, Jen.

Jennifer Riley: Great to be here, thanks for having me Jerry.

Jerry:  Today we’re discussing I think the most interesting development in the class action space over the last 24 months, and that would be settlement activity. I’m a big believer that one can tell a lot about what’s going on in the class action world based on settlements in terms of what the going rate is to settle these cases – and the Duane Morris Class Action Review has a full chapter on the top 10 settlements measured by monetary values across a wide area of cases. I know, Jen, that the last year was an exceptional year of settlements – what was the major takeaway for employers?

Jen: Absolutely, Jerry. So in 2022 there were more billion dollar settlements than ever before. The opioid litigation settlements in particular fueled record highs as distributors and manufacturers inked settlements with numerous states to pay out for allegations that they contributed to the opioid epidemic in the United States. So all 10 of the largest settlements of the year 2022 were opioid related. Those numbers were astronomical – they included settlements for $7.4 billion involving distributor McKesson and $6.1 billion involving distributor AmerisourceBergen to resolve the vast majority of the opioid lawsuits brought by state and local governmental against those entities.

Jerry: It’s interesting, Jen – having studied this space for going on 20 years now, most years’ average settlements across all areas were three to five billion dollars and all of a sudden have a year where the settlements top $60 billion. It brought to mind for me the only analogous situation was two decades ago when state attorney generals and private plaintiffs settled big tobacco cases – about 20 to 25 billion dollars, a lot of money at that time two decades ago was spent, so 2022 was an exceptionally unique year by any measure. I think one of the largest consumer fraud settlements, the $6 billion student loan settlement in Sweet, et al. v. Cardona Student Debt Cancellation Settlement kind of rounded out the story in terms of big blockbuster numbers across the board.

Jen: I will also note that there were some very large antitrust settlements in 2022. The top one came in at about $2.67 billion in In Re Blue Cross Blue Shield Antitrust Litigation. That was an antitrust class action involving claims that health insurance companies violated the Sherman Antitrust Act by entering into unlawful agreements to restrain competition among them in the health and insurance sales market.

Jerry: Well not only antitrust, but also securities fraud – we had the $1 billion In Re Dell Technologies Inc. Class V Stockholders Litigation settled in Delaware as well as the $800 million In Re Twitter Inc. Securities Litigation. Those were robust settlement numbers that also pushed the settlements even higher. What were some of the other areas that you think worth watching in the current calendar year in terms of the potential for large class action settlements?

Jen: Well, definitely the largest settlement so far this year happens to be in the products liability and mass torts space. There the top story is the resolution of claims relating to contamination from so-called forever chemicals in firefighting foam. As of August of this year, all of the claims by local water authorities and municipalities have been resolved in a global settlement agreement. 3M, DuPont, and other defendants will reportedly pay about $10.3 billion to resolve those claims as part of that settlement deal.

Jerry: That is one heck of a blockbuster settlement. The other area where I think we’re going to see significant settlement activity at very high levels would be in the antitrust bucket, and will continue to see large numbers there although it would take a lot of settlements to break the record that was compiled in calendar year 2022 by our calculations checking this on a daily basis from January 1 to the present, we’re at about $38 billion dollars so uh year even if there wasn’t another settlement in 2023 after 2022, 2023 would be the biggest settlement year in the history of American jurisprudence, so still a very, very impressive record being shown by the plaintiffs’ bar in monetizing these class actions.

Jen: Agreed. Those are some impressive sums thus far this year, it will be very interesting to see how the rest of the year unfolds on that front.

Jerry: We’ll be sure to share these results in our analysis with our readers and listeners in terms of our 2024 Duane Morris Class Action Review. Thanks Jen for joining me today and for your great insights and analysis as always, and thank you to our listeners for tuning in to our Friday weekly podcast. Thank you.

Read It And Weep, Subscribers – Attorneys’ Fee Award Delays Approval Of NYT Settlement  

By Gerald L. Maatman, Jr. and Katelynn Gray

Duane Morris Takeaways – In Moses v. N.Y. Times Co., No. 21-2556, 2023 WL 5281138 (2d Cir. Aug. 17, 2023), Objector-Appellant Eric Isaacson (“Isaacson”) was successful in appealing an order of the U.S. District Court for the Southern District of New York approving a class action settlement, and attorneys’ fee award, and an incentive award in a class action against the New York Times (the “NYT”) alleging violations of California’s Automatic Renewal Law. The Second Circuit’s opinion is a case study for corporate counsel on the attributes of class action settlements that courts are apt to reject during the approval process.

Background Of The Case

Plaintiff Maribel Moses (“Moses”) brought a class action on behalf of similarly-situated subscribers in California against the NYT alleging it violated the California Automatic Renewal Law (“ARL”) by enrolling consumers who sign up for a NYT subscription, either through its website or the App, in a renewing subscription without providing the requisite disclosures and authorizations.

The parties engaged in informal discovery and mediation right off the bat and reached an agreement which settled the claims of 876,606 persons.  Under the terms of the settlement agreement, NYT agreed to implement business reforms to comply with the ARL, and to provide class members with Access Codes valid for a one-month free subscription to a NYT product, or a pro rata cash payment. A $1.65 million non-reversionary settlement fund was established to pay all approved claims, attorneys’ fees of up to $1.25 million, and a court-approved incentive award to Moses of up to $5,000.

The district court preliminarily approved the settlement agreement on May 12, 2021 and conditionally certified the class for settlement purposes.  Of the 876,606 persons, three class members, including Isaacson, objected to the settlement.  Isaacson’s arguments were focused on the fairness of the settlement, the attorneys’ fees calculation, and the lawfulness of the incentive award.  In approving the settlement, the district court applied a presumption of fairness standard and found it was reached in “arm’s-length negotiation between experienced, capable counsel . . . after a nine-hour mediation before a neutral third party.”  Id. at 8.  The district court further found the relief afforded to the class was “commensurate with the harm alleged” and that the incentive award was appropriate under Second Circuit precedent.  Id. at 9. With respect to the proposed attorneys’ fee award, the district court found the Access Codes were not coupons under the Class Action Fairness Act’s (“CAFA”) coupon settlement provisions, which includes various restrictions on the award of attorneys’ fees. Instead, the district court looked to the value of the entire settlement in determining whether the award was appropriate and ruled that given its face value of $5,563,000, $1.25 million in attorneys’ fees (22.5% of the total face value of the settlement) was reasonable.  The attorneys’ fee award constituted 76% of the $1.65 million settlement fund.

Isaacson appealed the judgement to the Second Circuit.

Second Circuit’s Decision To Vacate The District Court’s Judgment

In vacating the district court’s judgement, a three-judge panel of the Second Circuit agreed with Isaacson that the district court applied the wrong legal standard when it approved the proposed settlement and wrongly concluded that the Access Codes were not “coupons” under the CAFA.

Federal Rule of Civil Procedure 23(e) requires court approval when settling claims of a certified class and provides that a district court may only approve a class-wide settlement after a hearing and only on finding that it is “fair, reasonable, and adequate.”  Acknowledging the nine factors historically used to evaluate the fairness, reasonableness and adequacy of a class settlement, and without displacing them, the panel pointed to the 2018 revisions to Rule 23(e)(2), which include a list of four considerations district courts must evaluate, one of which is whether the “proposal was negotiated at arm’s length.”  The inclusion of this factor, the panel held, “prohibit courts from applying a presumption of fairness to proposed settlements arising from an arms-length agreement.”  Id. at 13.  Instead, the panel explained, courts must consider all four factors outlined in Rule 23(e)(2) “holistically,” which includes, among other considerations, taking into account the terms of any proposed award of attorney’s fees.  Id.

Isaacson argued, and the panel agreed, that the district court erred when it presumed the proposed settlement was fair because it was reached in an arm’s-length negotiation, and further abused its discretion when it failed to evaluate such fairness in light of the attorneys’ fee and incentive awards. Notably, the panel opined “the error does not automatically require the reversal of the settlement’s approval”, and that it is “possible” the district court’s errors could be “harmless.”  Id. at 22.  In this case however, the panel found the error could not be “written off as harmless” given the fee awards were “intimately intertwined with the settlement.” Id. at 22-23. In fact, the panel pointed out that the amount of attorneys’ fees and incentive payment awarded directly impacted the amount of funds available for pro rata distribution to class members. As such, the district court was required to consider these fees, not just separately, but together with the other requisite considerations.

With respect to the attorneys’ fee award, the panel agreed with Isaacson that the Access Codes were coupons “under the plain meaning of the word,” i.e., digital vouchers provided to class members valid only for “select products or services.” Id. at 29, 32.  The fact that the class members had the option to take cash relief was not of import, the panel found.  As such, since the Access Codes were coupons, the district court was required to apply the CAFA’s coupon settlement provisions when calculating the attorneys’ fee awards, which looks to the redemption value of the coupons, as opposed to the face value of the settlement.  On remand, the panel said the district court must evaluate the settlement both in light of the fee award and comply with the CAFA’s coupon settlement requirements when determining the amount of such an award.

The one argument of Isaacson’s shot down by the panel was his challenge to the approval of the $5,000 incentive award. It refused to reverse established precedent in the Second Circuit or depart from Rule 23, which allows incentive awards that are fair and appropriate.

The panel ultimately vacated and remanded the district court’s order approving the settlement and the attorneys’ fees award. At that same time, it did not opine on the fairness of the settlement or suggest that it must be overturned.

Implications For Corporate Defendants

The Second Circuit’s ruling is a perfect example of how an attorneys’ fee award that is not thought through can serve to delay, and potentially derail, the class action settlement process. It is not enough to simply consider it on its own, but the proposed attorneys’ fee award must be considered holistically with all the Rule 23(e)(2) factors in determining whether the ultimate proposal is fair, reasonable, and adequate.

Georgia Federal Court Approves Consent Judgment For Department Of Labor-Initiated FLSA Action

By Gerald L. Maatman, Jr., Jennifer A. Riley, and George J. Schaller

Duane Morris Takeaways: In Su v. 811 Autoworks LLC et al., No. 3:21-CV-00220 (N.D. Ga. June 5, 2023), a federal district court in Georgia entered a consent judgement requiring an employer to pay approximately $40,000 for back wages and liquidated damages to end an FLSA suit filed by the U.S. Department of Labor (DOL) last year. The circumstances of the award are far from typical, and show how context is everything.

For employers facing DOL-initiated lawsuits involving retaliation, overtime, and recordkeeping prohibitions of the FLSA, this decision is illustrative of the potential for liquidated damages for failures to adhere to the FLSA, particularly in disputes over back wages and final wages where retaliation occurs.

Case Background

The DOL filed an FLSA action on behalf of former workers (“Claimants”) of 811 Autoworks LLC d/b/a/ AOK Walker Luxury Autoworks (“AOK”) and AOK’s owner, Miles Walker.  The Claimants alleged they were denied pay for final wages and did not receive required overtime pay when they worked over 40 hours in a workweek.  In its investigation, the DOL also determined Walker failed to keep adequate and accurate records of employees’ pay rates and work hours in violation of the FLSA’s recordkeeping prohibitions.

Additionally, at least one Claimant, Andreas Flaten, alleged he was retaliated against for requesting his final paycheck where AOK delivered his final $915 paycheck as 91,500 oil covered pennies with an expletive marked pay stub left on the driveway of his residence. Subsequently, the oil covered pennies damaged Flaten’s driveway and took nearly seven hours to remove.

The Court’s Decision

The Court resolved the DOL suit by entering its consent judgment. The consent judgement directed AOK to compensate workers who exceeded 40 hours in a workweek at a rate of “at least one-half times the regular rate at which such employee is employed, unless such employee qualifies for an exemption . . .”  Id. at 2. The consent judgment also ordered that AOK must “not threaten or intimidate (verbally or in writing), terminate or threaten to terminate, coerce or attempt to influence behavior, disparage in person or electronically, or retaliate or discriminate against any current and/or former AOK employees based on AOK’s belief that an employee was engaged in protected activity.” Id. at 2-3.  The Court further included a definition for “protected activity.” Id. at 3.  The consent judgement required AOK “shall not fail to make, keep and preserve adequate and accurate employment records as prescribed by Regulation.” Id.  In response to Flaten’s retaliation allegations, the Court sought immediate removal from AOK’s website all photographs and references to Flaten and permanently enjoined AOK from posting photographs or references to Flaten on any other website or social media site. Id.

As to payments, the Court held AOK was “restrained from withholding back wages in the total amount of $19,967.9 plus liquidated damages in the amount of $19,987.09.” Id. at 4.  The Court provided a schedule for the payments, where the payments must be delivered to, and noted AOK would be in default for failure to make any payments per the schedule. Id. at 4-5.  Finally, the Court required AOK to post this Consent Judgment and immediately post U.S. Department of Labor, Wage and Hour Division Fact Sheet #77A in all conspicuous places in or about its facility. Id. at 6.

Implications For Employers

Employers that are confronted with DOL-initiated litigation involving FLSA prohibitions should, from a practical standpoint, continuously review recordkeeping procedures, overtime policies, and final wage policies to ensure FLSA compliance. Employers should also note that, in response to the alleged retaliation, the Court sought removal of and enjoined the company from referencing the retaliated claimant on its own website and any other website or social media site. And obviously, paying disputed wage by dumping a truckload of oil-covered pennies on the driveway of a worker is ill-advised.

District Court Declines To Award Additional Attorneys’ Fees In $508 Million Sex Discrimination Class Action Settlement

By Gerald L. Maatman, Jr. and Rebecca S. Bjork

Duane Morris Takeaway: Even when class actions span decades prior to settling, the case seems unwinnable, the settlement contains a vast record, and the outcome was largely favorable to plaintiffs, courts nonetheless might be reluctant to add a “superior attorney performance” lodestar multiplier for an award of attorneys’ fees when the evidence provided by plaintiffs’ counsel is insufficient to do so. This issue was present in the U.S. District Court for the District of Columbia’s recent ruling in the extraordinary 45-year long case of Hartman, et al. v. Blinken, Case No. 77-CV-2019 (D.D.C. Mar. 31, 2023).

The ruling is a must read for any corporate counsel involved in class action litigation.

Case Background

Hartman was originally filed on Nov. 25, 1977 by over 1,000 female plaintiffs alleging that they were discriminated against by the United States Information Agency on the basis of their sex in violation of Title VII of the Civil Rights Act when they were allegedly passed over for hiring or promotions at the agency. The resulting litigation continued for decades, until the last several years, which involved negotiations between the plaintiffs’ counsel and the United States Department of State, the resulting defendant following the dissolution of the U.S. Information Agency. In 2000, the parties entered into a consent decree that provided for a $508 million settlement fund for the class and for “reasonable attorneys’ fees, expenses, and costs.” Id. at 2. The parties also settled more than 20 interim attorneys’ fee requests. Id.

The class action settlement constitutes the largest employment discrimination class action settlement ever.

In 2018, after all settlement funds were issued, plaintiffs filed a motion for a final determination of attorneys’ fees, seeking an additional award of $34 million as an enhancement to the lodestar amount.

Following an extensive evaluation and analysis of the previously awarded attorneys’ fees, the court denied plaintiffs’ request. It ruled that although the lodestar fee that had been awarded up to that point was “likely not an adequate measure of class counsel’s true market value,” plaintiffs had failed to properly identify information necessary for the court to approve a modification to the award. Id. at 3. Specifically, the court noted that plaintiffs had not submitted information regarding the “Laffey Matrix rates” used to calculate interim fees over the past several years, and failed to provide interest rate differences between the 1-year Treasury bill rate and the prime rate. Id. at 3-4.

The parties thereafter stipulated that defendants: (i) would pay plaintiffs $9,033,600 to resolve any issues concerning the use of the below-market Laffey Matrix rates and the Treasury bill interest rate; (ii) that the value of the base lodestar for the enhancement was $19 million; and (iii) that all other claims based on delay of fees, true market lodestar value, or interest paid on the interim fee awards were fully resolved. Id. at 4. The only remaining issue, identified by the parties as a potential dispute, was the possibility of a lodestar enhancement for “superior attorney performance” or “exceptional results.” Id.

Plaintiffs thereafter filed a motion for a lodestar enhancement based on “superior attorney performance.” The court denied the motion.

The Court’s Ruling

The court reviewed plaintiffs’ request under the D.C. Circuit’s “three-part analysis to assess appropriate fee awards under fee-shifting statutes in cases involving complex federal litigation.” Id. at 5. Under that framework, the third part of the analysis, or whether the use multiplies as warranted, was applicable here. Id.

Plaintiffs asserted that exceptional results and superior lawyering justified enhancement of the lodestar because it did not account for: (i) the results obtained; (ii) “the preclusion of other employment by committing both human and capital resources to the case;” (iii) “the duration of the case;” (4) “the ‘undesirability’ of the case;” and (iv) “awards in similar cases.” Id. at 10.

The court essentially found that none of the factors warranted a lodestar enhancement, as all factors were already accounted for in other areas of the lodestar determination. The court explained that any special results obtained should be already reflected in the reasonableness or the hourly rates. The court also noted that the complexity and voluminous nature of the record materials would be reflected in the overall number of hours billed. The court also stated that plaintiffs failed to show how any special commitment of human or capital resources was not already reflected in the lodestar.

As to plaintiffs’ argument that the case was “undesirable” and thus an enhancement was warranted, the court ruled that plaintiffs failed to identify specific evidence demonstrating that the case was undesirable, which was required under pertinent case law. Further, any societal implications from plaintiffs’ victory could not be measured in an objective way by the court in order to provide a lodestar enhancement.

The court concluded by emphasizing that the decision not to multiply the lodestar should not be taken to diminish the “resounding success plaintiffs’ counsel achieved.” Id. at 13-14. However, the court ruled that this case was not the “rare” or “exceptional” case in which “specific evidence” supports an “objective and reviewable basis” for enhancement of the lodestar. Id. at 14. The court thereby denied plaintiffs’ request for an enhancement of the lodestar amount.

Implications For Employers

Fee awards are discretionary, but the ruling in Hartman demonstrates the high standard of evidence required for an enhancement award. This decision is an excellent reference for defense efforts to fight attorneys’ fees awards in large-scale class actions.

DMCAR 2023 Trend # 1 – Class Action Settlements In 2022 Redistributed Wealth At An Unprecedented Level Video

By Gerald L. Maatman, Jr. and Jennifer A. Riley

Duane Morris Takeaway: In today’s video blog, Duane Morris partner Jerry Maatman discusses how the aggregate monetary value of class action settlements exploded to an all-time high in 2022, as plaintiffs’ lawyers and government enforcement agencies monetarized their claims into enormous settlement values. In 2022, the plaintiffs’ bar was successful in converting case filings into significant settlement numbers at higher levels than any recent year. Tune in below to hear all about this 2022:

 

 

DMCAR 2023: Trend # 1 – Class Action Settlements In 2022 Redistributed Wealth At An Unprecedented Level

By Gerald L. Maatman, Jr. and Jennifer A. Riley

Duane Morris Takeaway: As authors and editors of our firm’s our Class Action Review, we identified ten (10) key trends in class action litigation over the past year. Trend # 1 focuses on the unprecedented number of massive class action settlements reached in the last 12 months. Aside from the Big Tobacco settlements nearly two decades ago, 2022 marked the most extensive set of billion-dollar class action settlements in the history of the American court system.

 In 2022, there were 15 class actions that resolved cases for $1 billion or more in settlements.

In the aggregate, the value of these settlements totaled $63.66 billion. The members of the billion-dollar settlement club include the following:

The largest 20 settlements during 2022 included the following:

Many of these settlements arose from opioid litigation against the pharmaceutical industry.

On an aggregate basis, class actions and government enforcement lawsuits against opioid manufactures, retailers, and distributors garnered more than $50 billion in settlements.

Much like the era of Big Tobacco settlements that transformed that industry, the opioid settlements are transforming the pharmaceutical industry and its distribution chain.

When the final tally is completed over the next several years, the aggregate settlements may top $100 billion.

These settlements have redistributed wealth at an unprecedented rate.

The plaintiffs’ class action bar scored rich settlements in virtually every area of class action litigation. The following provides the overall total of the top 10 most lucrative settlements in each of these areas:

$50.32 billion – Products liability class actions and mass tort
$8.596 billion – Consumer fraud class actions
$3.729 billion – Antitrust class actions
$3.254 billion – Securities fraud class actions
$1.31 billion – Civil Rights class actions
$896.7 million – Privacy class actions
$597 million – Employment discrimination class actions
$574.55 million – Wage & hour class and collective actions
$404.5 million – Government enforcement actions
$399.6 million – ERISA class actions
$719.21 million – Data breach class actions
$210.11 million – Fair Credit Reporting Act class actions

Suffice to say, 2022 was unlike any other year on the class action settlement front. As success often begets copy-cats, corporations can expect the plaintiffs’ class action bar will be equally if not more aggressive in their case filings and settlement positions in 2023.

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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