United States District Court, W.D. Missouri, Western Division
ORDER DENYING APPROVAL OF PARTIAL FLSA SETTLEMENT
GREG KAYS, Chief District Judge.
This case is an "opt-in" collective action arising out of Plaintiffs' employment as loan officers with Defendant Pulaski Bank ("Pulaski"). Plaintiffs allege that Pulaski violated the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201-219, by willfully failing to pay them the minimum wage and overtime compensation due. Pulaski denies the allegations.
Now before the Court is "Settling Opt-In Plaintiffs' Unopposed Motion for Approval of Partial FLSA Collective Action Settlement" (Doc. 60). As part of a settlement reached in an unrelated state court lawsuit, Plaintiffs Eric Eisenmenger, Derek Mannell, Cherrie Miller, Barry Priest, Christopher Resch, Curtis Schartz, Nathan Steele, Nikki Tygard, Kelly Whitwood, Charles Ziegler, and Jennifer Zillner (collectively, the "Settling Plaintiffs") move to dismiss their FLSA claims in this case. The Settling Plaintiffs are submitting the FLSA portion of the settlement to this Court for approval since it has jurisdiction over their FLSA claims.
After carefully reviewing the settlement and the applicable law, the Court declines to approve it because: (1) the existing record does not demonstrate that a bona fide wage and hour dispute exists; but more importantly (2) the Settlement is not fair and equitable; and (3) the Settlement does not provide for a mandatory award of attorneys' fees and costs. Accordingly, the motion is DENIED.
On November 15, 2012, Pulaski filed an amended petition in the Circuit Court of St. Louis County, Missouri ("the State Court Action") against a competitor, First State Bank, and nineteen of Pulaski's former employees ("the Former Employees") (collectively First State Bank and the Former Employees are "the State Court Defendants"), who worked as loan officers for Pulaski. The Settling Plaintiffs are eleven of the nineteen Former Employees. Pulaski alleged the State Court Defendants conspired to divert loans, customers, and loan opportunities from Pulaski to First State Bank. It alleged the Former Employees engaged in tortious interference with Pulaski's business relationships and contracts; breached their duty of loyalty and recovery under the faithless servant doctrine; misappropriated trade secrets and violated the Uniform Trade Secrets Act; tampered with Pulaski's computers; and engaged in unfair competition and civil conspiracy. Pulaski sought hundreds of thousands of dollars in actual and punitive damages from the State Court Defendants, including the Settling Plaintiffs.
The Settling Plaintiffs retained counsel to defend them in the State Court Action,  and had the case continued to trial, they would have accrued "substantial" attorneys' fees. Memo. in Support at 6.
On December 12, 2012, Todd Branson ("Branson") filed the pending FLSA collective action against Pulaski for unpaid wages (the "FLSA action"). Branson brought this case on behalf of himself and all other similarly situated loan officers employed by Pulaski during the relevant period. The Settling Plaintiffs joined this lawsuit by filing consents to join. Attorney George Hanson ("FLSA counsel") represents all of the Plaintiffs, including the Settling Plaintiffs, in this case.
On May 20, 2013, Pulaski and the State Court Defendants attempted to mediate their dispute. Although they did not reach an agreement, they continued to negotiate and finally reached a settlement ("the Settlement") in late August 2013.
As part of the Settlement, Pulaski agreed to release all its claims against the State Court Defendants, including the eleven Settling Plaintiffs. In return, First State Bank, on behalf of itself and the Former Employees, agreed to pay the mediator's fee and, more significantly, pay Pulaski $475, 000. The Former Employees also agreed to release all claims they might have against Pulaski, including any FLSA claims, and specifically agreed to waive their FLSA claims brought in this case.
The Settlement did not provide for an award of attorneys' fees for work prosecuting the Settling Plaintiffs' FLSA claims. FLSA counsel has also stated he "is not seeking attorneys' fees or expenses as part of the proposed settlement." Doc. 61-5, Declaration at ¶ 6.
Judging from the existing record, the parties negotiated the Settlement in the State Court Action before engaging in any discovery related to the Settling Plaintiffs' FLSA claims. The Settling Plaintiffs indicate the Settlement is the product of contested litigation, but the contested litigation they are referring to is the State Court Action, not this case. The parties to the State Court Action negotiated the Settlement while merits discovery in this case was in its infancy.
Three of the four attorneys representing the Settling Plaintiffs' in the State Court Action have submitted declarations to the Court stating that at some point they received guidance from FLSA counsel concerning the value of their clients' FLSA claims. These statements, however, are conclusory and do not provide any details about when this guidance was given or what the estimated range of values was. FLSA counsel has also submitted a declaration stating that he shared with these attorneys his best estimate of the potential range of values for their claims. His declaration is also conclusory and does not indicate when he shared this information or what he estimated the range of values for their claims to be. All of the above attorneys' declarations include perfunctory assertions that the Settlement is fair and reasonable, but they do not explain how or why it is fair and reasonable.
On September 23, 2013, Pulaski and the Settling Plaintiffs submitted a joint stipulation of dismissal in this lawsuit seeking to dismiss the Settling Plaintiffs' FLSA claims with prejudice, but they did not seek Court approval for the Settlement. The Court denied this joint stipulation on October 4, 2013, noting that the Settling Plaintiffs could not dismiss their claims with prejudice unless the Court first reviewed and approved the Settlement.
On October 17, 2013, the Court conditionally certified this case as a collective action and conditionally certified a class defined as "[a]ll current and former loan officers of Pulaski ...