Perez v. Owl, Inc.

• Decision Date: 18 July 2022
• Docket Number: 6:17-cv-1092-CEM-DAB
• Parties: JOSE PEREZ, ALFREDO SANTOS and DOUGLAS RICHEY, Plaintiffs, v. OWL, INC., Defendant.
• Court: U.S. District Court — Middle District of Florida

JOSE PEREZ, ALFREDO SANTOS and DOUGLAS RICHEY, Plaintiffs,
v.
OWL, INC., Defendant.

No. 6:17-cv-1092-CEM-DAB

United States District Court, M.D. Florida, Orlando Division

July 18, 2022

REPORT AND RECOMMENDATION

CELESTE F. BREMER UNITED STATES MAGISTRATE JUDGE

TO THE UNITED STATES DISTRICT COURT:

This cause came on for consideration with oral argument regarding the parties' settlement^[1] and on the following motion filed herein:

MOTION: PLAINTIFFS' SECOND ASSENTED-TO MOTION FOR SETTLEMENT APPROVAL [OF THE FLSA COLLECTIVE ACTION] (Doc 212)

FILED: April 4, 2022

THEREON it is RECOMMENDED that the motion be GRANTED in part with the revision to the “Notice of Collective Action Settlement” described infra

In this dispute concerning unpaid wages to drivers of a corporation who

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contracted with the federal government, the parties have reached a proposed settlement on the overtime claims under the Fair Labor Standards Act ("FLSA”) and seek to have judgment entered so that the appeal of Plaintiffs' other claim-for breach of contract relating to their regular pay rate - may proceed. If the settlement of the collective action under the FLSA is approved, then the settlement funds totaling $350,000 will be held in escrow until Plaintiffs' appeal on their breach of contract claim is fully adjudicated.

I. FACTUAL AND PROCEDURAL BACKGROUND^[2]

Defendant Owl, Inc. contracts with the Department of Veteran's Affairs ("VA”) to provide nonemergency transportation services for patients, including transportation for patients in wheelchairs and those who require a stretcher. Doc. 151. On June 15, 2017, Plaintiffs Jose Perez, Alfredo Santos, and Douglas Richey (collectively, the "Named Plaintiffs”) filed a Class Action and Collective Action Complaint on behalf of themselves and other "similarly situated individuals, namely, all other persons who have worked for [Defendant] as drivers transporting patients.” Doc. 1 at ¶ 11.

Because Defendant provides services under a federal contract, it is subject to the Service Contract Act ("SCA”). Doc. 151 at 1 (citing 41 U.S.C. § 6701 et seq.; 41

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U.S.C. § 6702(a)(1)). Among other things, the S.C. A requires that individuals employed by Defendant under its contracts with the VA be paid in accordance with prevailing rates as determined by the Secretary of Labor. Id. (citing 41 U.S.C. § 6703(1)). Defendant is also required to pay its employees in accordance with the FLSA. Id. (citing 29 U.S.C. § 201 et seq.).

Named Plaintiffs alleged that they worked as drivers for Defendant, and routinely worked in excess of forty hours per week but were not properly paid overtime in violation of the FLSA; Plaintiffs brought this claim (Count I) as a collective action. Doc. 1 at ¶ 1, 9-10. Defendant denied that it failed to properly pay the drivers and asserted that driver supervisors were exempt from overtime. Doc. 16.

On March 11, 2019, District Judge Mendoza conditionally certified two collective subclasses of hourly drivers and road supervisors:

a. Road Supervisors: Drivers employed by Owl, Inc. since June 15, 2014, who have been labeled as “road supervisors” and paid on a salary basis.

b. Hourly Drivers: Drivers employed by Owl, Inc. since June 15, 2014, who have been paid on an hourly basis.

Doc. 134 at 2.

Named Plaintiffs also alleged in a claim brought as a “Rule 23 class action” (Count II) that Defendant breached the drivers' employment agreements - which they alleged incorporated the terms of the SCA - and that Defendant improperly classified and failed to pay them “at the applicable prevailing wage rate for all hours

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worked.” Doc. 1 at ¶ 3, 10-11. The drivers were hourly employees paid under the SCA at the prevailing rate for taxi drivers, and the road supervisors were paid an annual salary. Doc. 151. Named Plaintiffs argued that the drivers should have been paid as ambulance drivers (or shuttle bus drivers, according to Plaintiffs) instead of taxi drivers. Id. at 2.

However, on May 17, 2019, Judge Mendoza granted summary judgment for Defendant on the breach of contract claim (Count II). Doc. 151. He found as a matter of law Plaintiffs could not prevail on their claim that Defendant breached the employment agreements by failing to comply with the SCA because the Act did not provide a private right of action. Id. at 5-6. Additionally, he granted Defendant's motion in limine to prevent Plaintiffs from introducing evidence at trial that the base rate for calculating their overtime claims should be anything other than the rate of pay they actually received. Id. He also denied Plaintiffs' Motion seeking summary judgment as to whether Defendant properly categorized road supervisors as exempt employees under the FLSA. Id. at 7.

On Named Plaintiffs' motion, Judge Mendoza certified the summary judgment order for interlocutory appellate review. Doc. 157. On November 19, 2019, the Eleventh Circuit issued its mandate denying Named Plaintiffs permission to appeal the judgment as to Count II. Doc. 158. The parties proceeded with discovery and trial preparation. At a trial status conference on August 3, 2021, the parties

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advised Judge Mendoza that they had reached a settlement on the sole remaining claim under the FLSA. Docs. 160, 177.

On November 16, 2021, Named Plaintiffs filed a Renewed Motion for Approval^[3] of their settlement agreement, attaching a signed copy of the parties' settlement agreement (the “Settlement Agreement”). Doc. Nos. 188, 188-1. As Plaintiffs explained, Judge Mendoza's rulings “significantly reduced the damages available to the Named and Opt-in Plaintiffs as it limited Plaintiffs' damages solely to overtime pay at the rate they were already paid.” Doc. 188 at 3. They further explained:

Rather than proceed to a trial solely to determine the named and opt-in Plaintiffs' damages at this stage, [Defendant] Owl has agreed to pay each individual who timely filed an opt-in form and worked overtime without receiving time-and-a-half for all hours over 40 within the statute of limitations, the amount of overtime they are owed pursuant to this Court's rulings, plus one-half liquidated [] damages, for a total of $225,000. The parties have also separately negotiated Plaintiffs' attorney's fees of $95,000 and service award payments to the three Named Plaintiffs totaling $30,000.

Id.

On January 20, 2022, concerned about the “service award payments,” the Court ordered the parties to provide briefing regarding whether the holding in Johnson v. NPAS Solutions, LLC, 975 F.3d 1244 (11th Cir. 2020), mandate withheld

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pending petition for rehearing en banc, No. 18-12344 (Nov. 9, 2020), would preclude the additional payments to Named Plaintiffs. Doc. 189. Both sides provided additional briefing on this issue. (Docs. 191, 199).

Following a hearing on February 3, 2022 (Doc. 203), the Court denied the Renewed Motion for Approval of the Settlement because several issues, in addition to the Johnson “service awards” issue, precluded granting approval: inconsistencies in the description of the amount of back wages and liquidated damages to the Opt-In Plaintiffs (versus the Renewed Motion); the lack of explanation of Defendant's potential “good-faith defense” justifying reduction in Plaintiffs' liquidated damages; a provision seeming to allow modification without Court review; and conflicts among the applicable time periods for determining the distribution amounts to the Opt-In Plaintiffs. Doc. 211.

On April 4, 2022, Named Plaintiffs filed their Second Motion for Approval (Doc. 212) of the settlement resolving the FLSA collective action claims and attaching an Addendum to the Settlement Agreement (Doc. 212-1).^[4] The

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Addendum resolves the concerns that the Court previously raised with the Renewed Motion and the parties' Settlement Agreement as to the amount of back wages and liquidated damages, deletes completely the proposed “services awards” to Named Plaintiffs with the $30,000 redistributed pro rata to all Plaintiffs^[5]; explains the basis for Plaintiffs' compromise of their liquidated damages claims; and clarifies that all modifications to the Settlement Agreement require Court approval.

II. ANALYSIS OF THE PROPOSED FLSA SETTLEMENT

A. FLSA Collective Action

Named Plaintiffs brought their FLSA claims for overtime pay on behalf of all of Defendant's drivers who worked more than 40 hours in a week (during the relevant time period) who choose to opt into the action under 29 U.S.C. § 216(b). Doc. 1 ¶ 36-39. The FLSA authorizes one or more employees to bring a collective action against their employer for unpaid minimum wages or unpaid overtime “for and on behalf of himself or themselves and other employees similarly situated.” 29 U.S.C. § 216(b). Unlike a typical Rule 23 class action in which class members must opt out in order not to be bound by the judgment, in a collective action under the FLSA, each putative plaintiff must affirmatively opt-into a § 216(b) action. Hipp v. Liberty Natl Life Ins. Co.,

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252 F.3d 1208, 1216 (11th Cir. 2001); Freeman v. TrainingWheel Corp., LLC, No. 2:19-CV-52-FTM-38UAM, 2019 WL 11502467, at *1 (M.D. Fla. May 10, 2019), report and recommendation adopted, No. 2:19-CV-52-FTM-38UAM, 2019 WL 2281677 (M.D. Fla. May 29, 2019).

1. Two-tiered approach

In the Middle District of Florida, a “two-tiered” approach to collective action settlements is applied, as explained by Judge Howard in Ruddell v. Manfre, No. 3:14-CV-873-J-34MCR, 2015 WL 12859415, at *1 (M.D. Fla. May 6, 2015):

The parties must first file a motion seeking conditional certification of the collective action. The motion should also request authorization to provide notice of the proposed settlement to potential members of the collective action. Once granted, the parties will then issue the

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