Seamands v. Sears Holding Corp.

• Decision Date: 11 March 2011
• Docket Number: Case No. 09-2054-JWL
• Parties: Clara Seamands et al., Plaintiffs, v. Sears Holding Corporation; Sears Roebuck and Co.; Sears Outlet Stores, LLC; and Sears Holdings Management Corporation, Defendants.
• Court: U.S. District Court — District of Kansas

Clara Seamands et al., Plaintiffs,

v. Sears Holding Corporation; Sears Roebuck and Co.; Sears OutletStores, LLC; and Sears Holdings Management Corporation, Defendants.

Case No. 09-2054-JWL

UNITED STATES DISTRICT COURT DISTRICT OF KANSAS

DATED: March 11, 2011

MEMORANDUM & ORDER

Having settled this class action lawsuit, plaintiffs now move the court for an award of attorneys' fees in the amount of $242,172.00 and costs and expenses in the amount of $20,177.69. As will be explained, the motion is granted in part, denied in part and retained under advisement in part. The court awards $73,052.50 in attorneys' fees and $8221.97 in costs and expenses. The court retains the motion under advisement with respect to the issues of who is entitled to receive the fee and how that fee should be distributed. Toward that end, plaintiffs are directed to show good cause to the court on or before Friday, April 1, 2011 why the fee award in this case should not be distributed on a pro rata basis directly to those class members entitled to a fee; why notice should not be reissued to those class members who are entitled to a fee award in this case; and why plaintiffs should not bear the cost of that notice.

I. Overview

In January 2009, plaintiffs, current and former employees of Sears' outlet stores, filed this class action lawsuit on behalf of current and former employees of defendants' "retail stores" alleging that defendants wrongfully withheld sales incentive compensation. In addition to breach of contract claims, plaintiffs asserted claims under the state wage payment laws of 36 states as well as the laws of Puerto Rico. By amended complaint filed in September 2009, plaintiffs clarified that they intended to pursue claims against both Sears' outlet stores and Sears' full-line stores and, toward that end, added a named plaintiff who had been employed at Sears' full-line stores. In June 2010, the parties moved to certify a class for settlement purposes, which was limited to outlet store employees working outside the state of California who sold a covered item during a specified time frame, and for preliminary approval of their settlement, pursuant to which defendants agreed to pay a total settlement amount of $36,114.00 to the settlement class. The court granted the motion and scheduled a final approval hearing.

Notice of the settlement was then mailed to the 857 potential members of the settlement class and only one potential class member opted-out of the class. The settlement administrator ultimately received 137 valid claim forms from members in 24 states as well as Puerto Rico representing an award amount of $10,452.50. No objections were filed. Thereafter, the parties moved for final approval of the settlement. In addition, plaintiffs filed a motion for attorney fees, expenses and class representatives' incentive awards asserting a claim for $242,172.00 in attorney fees and $20,177.69 in expenses. At the final approval hearing on October 4, 2010, the court granted the parties' motion for final approval of the settlement and approved the incentiveawards as unopposed.¹

With respect to plaintiffs' motion for attorney fees and expenses, however, the court expressed several specific concerns with plaintiffs' request, both in terms of whether plaintiffs would be able to show that they were entitled to a fee award at all and, if so, whether they would be able to show that a fee award in excess of $240,000 in the face of a $36,000 recovery was nonetheless reasonable. Concluding that the briefing on the fee issue was both unfocused and unhelpful, the court retained the motion under advisement and directed the parties to file supplemental briefs on the fee issue. That briefing has now been submitted.

In their initial motion for fees, plaintiffs asserted an aggregate claim for class-wide fees on the grounds that certain class members alleged claims under certain state wage payment statutes that, in turn, contained fee-shifting provisions, and because the work done by plaintiffs' counsel was "indivisible" in that it was not conducted on a state-by-state basis, plaintiffs, as a class, were entitled to an award of fees.² At the October 4, 2010 hearing, the court advised plaintiffs that they had not adequately shown (or directed the court to any authority) that thistheory of recovery was a viable one. In their supplemental briefing, plaintiffs have abandoned their efforts to obtain fees on a class-wide basis. Now, those plaintiffs who worked for Sears in one of eight specific states whose wage payment statutes contain fee-shifting provisions have asserted individual claims for fees. Plaintiffs still seek the full amount of the fee request on the grounds that the work done by counsel was not done on a state-by-state basis (it was indivisible) and counsel would have performed the same work even if this had been a single-plaintiff case. Consistent with this approach, plaintiffs urge that the court, in order to a award a full fee, need find only one state statute under which one class member would be entitled to fees. According to plaintiffs, then, if the court deems that named plaintiff Glenn Burrows is entitled to fees under the pertinent Missouri statute, then it need not look to any other state statute and may award plaintiffs their full fee because counsel's work was indivisible.

But there are clearly problems with this approach. First, the approach is premised on the notion that any fee award in this case would be paid directly to plaintiffs' counsel. For plaintiffs cannot mean to suggest that Mr. Burrows, in addition to whatever sum he received under the settlement agreement, would receive $242,172 and that plaintiffs' counsel would then take a percentage of that amount as provided in their contingent fee agreement with Mr. Burrows. This arrangement would not only provide a windfall to Mr. Burrows to the detriment of any other class member entitled to a fee but would undoubtedly present ethical problems for plaintiffs' counsel. But so, too, does counsel's implicit suggestion that any fee award be paid directly to counsel. The statutes under which plaintiffs seek attorneys' fees provide that attorneys' fees are available to the parties themselves, not to counsel. Each individual class member who wouldhave been entitled to recover fees in an individual action should not lose that opportunity because they participated in a class action, where an award of fees is sought only on an individual basis. The court, then, cannot simply find one statute under which one class member would be entitled to fees and stop the analysis there. Rather, the court must undertake an analysis of the pertinent laws of each of the eight states identified by plaintiffs as the basis for a fee award in this case. Moreover, because any fee award in this case belongs to the parties rather than counsel, the total amount of money available for distribution is potentially larger than indicated in the notice that was mailed to those class members. It may be, then, that class members who did not file a claim may have been inclined to do so if the amount available was higher. In all likelihood, that "higher" amount will not include the full fee award, for it makes very little practical sense to distribute the entire fee amongst those plaintiffs entitled to a fee award and then expect plaintiffs' counsel to collect their share from those individuals. An obvious starting point might be the contingency fee arrangement that counsel executed with the named plaintiffs, which provides for a 33% pre-trial settlement contingent fee, such that plaintiffs' counsel would take that percentage from the total recovery in this case (the fee award plus the underlying recovery) and distribute the remaining amount to those plaintiffs entitled to a fee award.

Plaintiffs, then, have simply not come to grips with the critical issues of who actually receives the fee award in this case and how that fee award should be disbursed. Plaintiffs, then, are directed to show good cause to the court on or before Friday, April 1, 2011 why plaintiffs' counsel should not retain from the fee award an amount equal to 33% of the sum of the feeaward and the underlying recovery in this case; why the remainder of the fee award should not be distributed on a pro rata basis directly to those class members entitled to a fee; why notice should not be reissued to those class members who are entitled to a fee award in this case; and why plaintiffs' counsel should not bear the cost of that notice. Defendants shall file any response no later than Friday, April 8, 2011.

II. Whether Any Class Members are Entitled to a Fee?

As explained above, the court must undertake a state-by-state analysis to determine whether any class members are entitled to recover fees pursuant to the particular state wage payment law under which those class members asserted a claim against defendants. As will be explained, the court concludes that those class members who work or worked for defendants in Florida, Wisconsin, Pennsylvania, Delaware and Washington are entitled to a fee award under those states' wage payment statutes.³ Class members in Missouri, Connecticut and New York are not entitled to a fee award.

A. Missouri

Those class members who work or worked for defendants in Missouri seek attorneys' fees under Missouri's statute on commissions for sales representatives. The pertinent section provides:

Any principal who fails to timely pay the sales representative commissions earned by such sales representative shall be liable to the sales representative in a civil action for the actual damages sustained by the sales representative and an additional amount as if the sales representative were still earning commissions calculated on an annualized pro rata basis from the date of termination to the date of payment. In addition the court may award reasonable attorney's fees and costs to the prevailing party.

Mo. Rev. Stat. § 407.913 (2005).⁴ The...