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Gundrum v. Cleveland Integrity Services, Inc.

United States District Court, N.D. Oklahoma

August 16, 2017

ERIC GUNDRUM and MICHAEL KING, individually and on behalf of all persons similarly situated, Plaintiffs,
v.
CLEVELAND INTEGRITY SERVICES, INC., Defendant.

          OPINION AND ORDER

          TERENCE KERN United States District Judge

         Before the Court is Plaintiffs' Unopposed Motion for Preliminary Approval of the Settlement Agreement (Doc. 89) and Memorandum of Law in support of Plaintiffs' Unopposed Motion (Doc. 90).

         I. Background

         A. Factual and Procedural Background

         Plaintiffs Eric Gundrum and Michael King worked as pipeline inspectors for Defendant Cleveland Integrity Services, Inc. (“CIS”) for various periods between 2013 and 2015. Plaintiffs describe themselves as blue-collar workers and allege that their work primarily entails manual duties. CIS paid them a specific amount per day that they worked. Plaintiffs allege that they routinely worked more than forty hours per week but that CIS did not pay them overtime compensation for hours worked over forty per week. Plaintiffs brought a putative collective action against CIS under the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq. (“FLSA”), on behalf of themselves and others similarly situated in the United States District Court for the Western District of Wisconsin. The parties briefed several issues before the case was transferred to this Court. Subsequently, the parties agreed to participate in an Alternative Dispute Resolution (“ADR”) process, during which they exchanged settlement-related discovery, engaged in settlement negotiations, and participated in an in-person mediation session with retired United States District Judge Wayne R. Andersen. After further negotiations, the parties agreed to settlement terms on behalf of a proposed settlement class under Federal Rule of Civil Procedure 23 (“Rule 23”) based on state law claims of unjust enrichment.[1]

         As set forth in Plaintiffs' Unopposed Motion, the parties seek the following forms of relief: (1) preliminary approval of the Settlement Agreement (Doc. 90-2); (2) preliminary certification of a Rule 23 class for settlement purposes, based on state law claims of unjust enrichment; (3) preliminary approval of Plaintiffs Eric Gundrum (“Gundrum”) and Michael King (“King”) as the representatives of the settlement class; (4) preliminary approval of Berger & Montague, P.C., as Class Counsel for the settlement class; (5) preliminary approval of Dahl Administration, LLC as Settlement Administrator and the costs of claims administration; (6) approval of the Class Notice and Claim Form attached to the parties' Settlement Agreement; and (7) approval of the proposed schedule and procedure for completing the process for final approval of a class-wide settlement.

         B. Terms of the Proposed Settlement Agreement

         The proposed class includes approximately 2, 300 individuals and is defined as follows:

All employees who worked for CIS in the job title of inspector and who were paid on a daily rate basis in any workweeks between January 1, 2015 and March 31, 2017, except for individuals who held only jobs containing the word “Chief.”

(Agreement ¶ 1) (hereinafter the “Class Members”).

         Under the Settlement Agreement, CIS will provide the Settlement Administrator with a list of all Class Members and their last known addresses, telephone numbers, email addresses, and social security numbers. If the Settlement Agreement is preliminarily approved, the Settlement Administrator will run the list of Class Members through the U.S. Postal Service's national change of address database and mail and email the Class Notice and Claim Form to the Class Members. Class Members will then have sixty days to submit a Claim Form, opt out of the settlement, or object to the settlement. The Settlement Administrator will send a reminder notice by mail and email thirty days before the end of the claim period.

         The Settlement Agreement includes a Gross Settlement Amount (“GSA”) of $4, 500, 000 to be paid by CIS. In addition to compensation to the Class Members, the GSA is to cover (1) service awards of $20, 000 to each of the two named Plaintiffs; (2) service awards of $2, 500 to each of five individuals who have consented in writing to participate as plaintiffs in this case (“Opt-In Plaintiffs”); (3) attorneys' fees of up to one-third of the GSA; (4) reimbursement of costs to Class Counsel, anticipated not to exceed $25, 000; (5) payment for the Settlement Administrator's services; and (6) CIS's share of payroll taxes applicable to any amount of the funds attributable to wages. The balance of the GSA is the Net Settlement Amount and will be distributed to Class Members who do not opt out of the settlement. Each Class Member will receive a minimum settlement payment of between $350 and $600, depending on the percentage of eligible Class Members who return claim forms. Class Members who submit timely claim forms will also receive shares of the Net Settlement Amount corresponding to the number of weeks worked in a qualifying position for CIS during the relevant time period and ultimately receive a payment based on the number of shares. Class Members who do not submit a Claim Form or opt out will receive only the minimum settlement payment. All settlement payments are allocated 40% as back wages subject to withholding taxes and reported on a W-2, and 60% as non-wage interest and/or damages or liquidated damages and not subject to withholding taxes. Settlement checks will be negotiable for 180 days from the date they are issued. The Settlement Administrator will mail and email a reminder to any Class Member who has not cashed his or her check after 90 days and will call those who have not cashed their checks when less than forty-five days of the 180-day window remain. The Settlement Administrator will maintain copies of all negotiated checks and will file a declaration with the Court listing the names of all Class Members who signed and deposited or cashed settlement checks. The amount of any uncashed settlement checks will be remitted by the Settlement Administrator to CIS in recognition that CIS will not receive any release of claims from those class members.

         The settlement checks (regardless of whether they returned a Claim Form), Class Members will include the following endorsement:

By signing, depositing, and/or cashing this check, I hereby consent to opt-in to the collective action in Gundrum v. Cleveland Integrity Services, Inc., No. 4:17-cv-00055-TCK-TLW (N.D. Ok.) as a party plaintiff pursuant to Section 16(b) of the Fair Labor Standards Act (“FLSA”) and agree to release Cleveland Integrity Services, Inc. (“CIS”) and all Released Parties from all claims, both known and unknown, that arise out of my employment with CIS under the FLSA, state statutory law (excluding workers' compensation laws, unemployment compensation laws, and discrimination laws), or common law (e.g., unjust enrichment, quantum meruit, etc.) concerning my compensation, hours of work, pay for those hours of work, or CIS's payroll practices through [the date of the Court's Preliminary Approval Order].

(Settlement Agreement ¶ 11.)

         The release applies to CIS and its past and present parent companies, investors in any of those companies, owners, controlling persons, subsidiaries, affiliates, shareholders, directors, officers, employees, insurers, reinsurers, attorneys and agents (collectively, the “Released Parties”). The named Plaintiffs and Opt-In Plaintiffs will also provide a general release to the Released Parties in consideration for their enhanced service awards.

         II. Jurisdiction

         Although the parties have not raised whether the Court has supplemental jurisdiction over their state law claims, other courts have examined whether supplemental jurisdiction is appropriate before proceeding with a proposed settlement class involving the release of FLSA and state law claims. See Pliego v. Los Arcos Mexican Restaurants, Inc., 313 F.R.D. 117, 123 (D. Colo. 2016). As in other cases in district courts within the Tenth Circuit, the Court finds that the exercise of supplemental jurisdiction is appropriate because the allegations underlying Plaintiffs' unjust enrichment claims essentially duplicate those underlying their FLSA claims, and separate proceedings would not serve the interests of judicial economy, convenience, and fairness. See Id. (collecting cases).

         III. Motion for Preliminary Approval of the Settlement Agreement

         To determine whether the Settlement Agreement should be preliminarily approved, the Court must determine whether it satisfies requirements under both the FLSA and Rule 23.[2]

         A. Preliminary Approval of FLSA Settlement

         1. ...


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