Duane Morris Class Action Review - 2023 - Report - Page 327
for preliminary settlement approval. The court denied the motion. It found that the
settlement as drafted was structured such that any Rule 23(b)(3) class member who did
not opt-out of the class would release both their FLSA and state law unpaid overtime
claims. The court concluded that the proposed settlement was antithetical to the
purposes behind the FLSA collective action process, which require a plaintiff to
affirmatively opt-in to the lawsuit by filing a consent to join form with the court.
Accordingly, the court denied the parties’ motion for preliminary settlement approval.
Approval of FLSA collective action settlements also raise concerns with the interplay of
attorneys’ fees and the overall settlement dynamics in the collective-wide settlement.
This played out in 2022 in the case of Shanley, et al. v. Evereve, Inc., 2022 U.S. Dist.
LEXIS 209266 (D. Minn. Nov. 18, 2022). In this case, the plaintiffs, a group of assistant
store managers, filed a collective action alleging that the defendant misclassified
assistant managers as exempt employees and thereby denied overtime compensation
in violation of the FLSA. Following two mediation sessions and extensive negotiations,
the parties executed a settlement agreement in January 2022. The court held a hearing
on the parties’ joint motion to approve the settlement, at which it expressed concern that
the parties had not discussed recent Eighth Circuit cases that directly addressed two
issues implicated by their motion, including: (i) whether the court has authority to review
and approve FLSA settlements; and (ii) whether the court may approve an FLSA
settlement in which the parties agreed that the attorneys’ fees claim would be settled by
giving the attorneys a percentage of the overall amount paid by the defendant to settle
the case. Id. at *3. The court found that judicial approval of all FLSA settlements is
necessary. However, the court noted that the question of whether the court had the
authority to approve the settlement did not ultimately matter here, because the
settlement of the attorneys’ fees claim was intertwined with the settlement of the wage
claim, thereby resulting in a conflict of interests between the plaintiffs and their
attorneys. Id. at *20-21. For these reasons, the court denied the parties’ joint motion for
approval of their proposed settlement.
Collective action settlements under the FLSA also raise concerns relative to
confidentiality. Most courts have grave concerns over the propriety of making collective
action settlements confidential. In 2022, that concern is best illustrated by the ruling in
Brennan, et al. v. Summer WWK LLC, Case No. 21-CV-423 (N.D. Ga. Dec. 12, 2022).
The plaintiffs, a group of film crew employees, filed a collective action alleging that the
defendants, the film’s directors and the production company, failed to pay all wages due
and failed to pay overtime compensation for work on the film in violation of the FLSA.
The parties ultimately settled the matter. The plaintiffs and the named defendant Cherell
George moved to enforce and approve the settlement. The court denied the motion.
Under the terms of the proposed settlement, the defendants would pay approximately
$171,000 and $40,000 for attorneys’ fees, but the settlement required that the plaintiffs
would maintain the confidentiality of the agreement. The court determined that the
settlement could not be approved, as the motion was not filed under seal as required by
the terms of the confidentiality provision in the proposed agreement. The court further
ruled that even if the parties had filed the motion under seal, confidentiality provisions in
settlement agreements are impermissible under the FLSA because they often
“contravene both the legislative purpose of the FLSA and the public’s interest in
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Duane Morris Class Action Review – 2023
