Tofaute v. Fedex Ground Package Sys., Inc. (In re Fedex Ground Package Sys., Inc.)
| Citation | 251 F.Supp.3d 1225 |
| Decision Date | 28 April 2017 |
| Docket Number | Case No. 3:05-MD-527 RLM (MDL 1700). |
| Parties | IN RE FEDEX GROUND PACKAGE SYSTEM, INC., EMPLOYMENT PRACTICES LITIGATION This Document Relates to: Michael Tofaute, et al. v. FedEx Ground Package System, Inc., Civil No. 3:05cv595 RLM–MGG (NJ) |
| Court | U.S. District Court — Northern District of Indiana |
Jerald R. Cureton, Cureton Clark PC, Mt Laurel, NJ, Peter J. Agostino, Anderson Agostino & Keller PC, South Bend, IN, for Michael Tofaute, et al.
Jeffrey S. Nestler, O'Melveny & Myers LLP, Washington, DC, Laura E. Robinson, O'Melveny & Myers LLP, Los Angeles, CA, Michael L. Banks, Sarah E. Bouchard, Morgan Lewis & Bockius LLP, Philadelphia, PA, Cheryl M. Stanton, Ogletree Deakins Nash Smoak & Stewart PC, Morristown, NJ, for FedEx Ground Package System Inc.
Twenty proposed class actions in this multi-district litigation docket came before me on March 13–14 for fairness hearings. The cases are on limited remand from the court of appeals, where nineteen of them awaited resolution. The Judicial Panel on Multi–District Litigation centralized the cases under 28 U.S.C. § 1407, but the cases haven't been consolidated, so each proposed settlement must be examined separately.
In July 2005, the JPMDL granted (over the plaintiffs' objections) FedEx Ground's second request to centralize a series of cases in which FedEx Ground drivers claimed to be employees, rather than the independent contractors their employment contracts announced. The Panel reasoned that economies were to be gained because all drivers were governed by the same contract. The MDL process proved cumbersome. Even if the wording of each contract was the same, each state's agency law varied, and differences in operation from one terminal to the next had the potential of affecting the decision.
The number of cases in the MDL docket eventually grew to 40. I appointed attorneys from three law firms to serve as co-lead counsel: Lockridge Grindal Nauen P.L.L.P. of Minneapolis, Harwood Feffer LLP of New York City, and Leonard Carder LLP of Oakland. I also appointed attorneys from three other firms—Cureton Caplan, P.C. of Delran, NJ; Siegel, Brill, Greupner, Duffy & Foster, P.A. of Minneapolis; and Zimmerman Reed P.L.L.P. of Minneapolis—to complete the plaintiffs' steering committee.
The stakes were enormous. Not only did the plaintiffs' co-lead counsel seek to represent upwards of 10,000 arguably under-compensated drivers, but the attack on drivers' independent contractor status threatened FedEx Ground's entire business model.
Consistent with those stakes, discovery was more than extensive. Although damages discovery was deferred, merits discovery and class discovery were conducted simultaneously. Some 3.2 million documents were produced and analyzed; seventeen sets of interrogatories were answered; 215 named plaintiffs answered fifteen requests for admission and sat for depositions; 105 FedEx Ground personnel sat for daylong depositions; 20 expert witnesses produced reports and sat for daylong depositions; Daubert motions were filed and defended. The class representatives were heavily involved in tracking down records and documents, as well as in preparing for, and giving, their own depositions.
The plaintiffs filed class certification motions in each of the cases; FedEx Ground opposed each motion. The plaintiffs filed an omnibus fact memorandum supported by 65 bankers' boxes of documents. In 2007 and 2008, I certified classes in 26 of the then–40 cases, and in all of the 20 on limited remand from the court of appeals. FedEx Ground sought interlocutory appellate review of the certification grants, and the plaintiffs successfully opposed that effort. Class notifications were hampered by spotty databases.
Sixty summary judgment motions and briefing followed. The drivers filed a 75–page statement of undisputed material facts with citations to 12 volumes. In 2010 and 2011, I denied a few of FedEx Ground's summary judgment motions but granted most, and granted all in the 20 cases now on limited remand. With respect to some of the cases, I suggested remand and the Panel sent the cases back to the transferor courts. Co-lead counsel appealed the summary judgment grants in these 20 cases to the United States Court of Appeals for the Seventh Circuit; in most of those cases, FedEx Ground cross-appealed the class certifications.
In both this court and the court of appeals, the parties recommended that the Kansas Craig case be addressed first, as something of a quasi-bellwether case. After briefing and argument, the court of appeals certified the employee/independent contractor case to the Kansas Supreme Court, which devised a new 18–part test and answered the certified question in the drivers' favor. Craig v. FedEx Ground Package Sys., Inc., 300 Kan. 788, 335 P.3d 66 (2014). The court of appeals ultimately reversed my grant of summary judgment to FedEx Ground in Craig , and remanded the case. In re FedEx Ground Package Sys., Inc. Emp't Practices Litig., 792 F.3d 818 (7th Cir. 2015). In addition to the reversal in the Kansas case, rulings in other courts were trending toward findings of employee status, see Alexander v. FedEx Ground Package Sys., Inc., 765 F.3d 981 (9th Cir. 2014) (California law); Slayman v. FedEx Ground Package Sys., Inc., 765 F.3d 1033 (9th Cir. 2014) (Oregon law), or at least toward fact issues for trial. See Gray v. FedEx Ground Package Sys., Inc., 799 F.3d 995 (8th Cir. 2015) (Missouri law); Carlson v. FedEx Ground Package Sys., Inc., 787 F.3d 1313 (11th Cir. 2015) (Florida law).
The parties didn't immediately ask me to find for the Kansas drivers on liability and suggest remand to the United States District Court for the District of Kansas. Instead, the parties had chosen a mediator in an effort to resolve all of the cases remaining in the Seventh Circuit.
Each case was mediated separately, with some cases requiring several sessions. Each case was mediated with an eye on the governing law, which varied from case to case. The mediation spanned four weeks. The drivers and FedEx Ground exchanged experts' views as to the maximum recovery for each case if the drivers prevailed across the board. Settlements were reached in each case, and the court granted preliminary approval of each of the settlements. The plaintiffs then retained Rust Consulting to administer the settlements.
I conducted fairness hearings on March 13 and 14, 2017, and on March 15 and 16, I notified the court of appeals of my inclination to enter final approval of the class settlements. The court of appeals entered a second limited remand order on March 22 to allow me to do so.
Parties can't settle class actions without the court finding that the proposed settlement is "fair, reasonable, and adequate." Fed. R. Civ. P. 23(e) ; Synfuel Technologies, Inc. v. DHL Express (USA), Inc., 463 F.3d 646, 652 (7th Cir. 2006) ; see also EEOC v. Hiram Walker & Sons, Inc., 768 F.2d 884, 889 (7th Cir. 1985) (). In that effort, we in this circuit consider several circumstantial factors:
(1) the strength of the case for plaintiffs on the merits, balanced against the extent of settlement offer; (2) the complexity, length, and expense of further litigation; (3) the amount of opposition to the settlement; (4) the reaction of members of the class to the settlement; (5) the opinion of competent counsel; and (6) stage of the proceedings and the amount of discovery completed.
Wong v. Accretive Health, Inc., 773 F.3d 859, 863 (7th Cir. 2014) (quoting Gautreaux v. Pierce, 690 F.2d 616, 631 (7th Cir. 1982) ). Of those, the first is the most important. Martin v. Reid, 818 F.3d 302, 306 (7th Cir. 2016).
The Tofaute case was filed in the District of New Jersey in May 2005, and was centralized in this court under 28 U.S.C. § 1407 in August 2005. I granted the plaintiffs' motion for certification of a class in October 2007, and granted summary judgment to FedEx Ground in December 2010, finding that the plaintiffs were independent contractors under New Jersey law. The class appealed.
In June 2016, the parties reached a proposed settlement. FedEx Ground would pay $25,500,000 to the plaintiffs. For each workweek of 35 or more hours during the class period, each class member would receive $72.39; for each workweek of 16–35 hours, each class member would receive $25.34. No class member would receive less than a $250 lump sum. The average recovery per class member would be $19,301, with the highest share being $71,194. No plaintiff would be required to fill out, or collect the information needed for, a claim form. No part of the settlement fund would revert to FedEx Ground if anything were left over.
The proposed settlement resulted from arms-length negotiations with a private mediator. Each side took stock of potential liability and damages under New Jersey law. The class consulted an expert in accounting and damages, who concluded that the maximum recovery the plaintiffs could achieve would be $46,733,000, exclusive of interest. FedEx Ground assessed the claims' value at less than that. The proposed settlement amounts to about 55 percent of a perfect outcome.
A perfect outcome would be a long way off. At this point, my ruling that these drivers are independent contractors under New Jersey law is the only judicial determination. The class would need for the court of appeals to find my ruling to have been in error; such an appellate ruling might consist only of a determination that New Jersey drivers might be employees, but a trial is needed. Such a ruling would be followed by a likely FedEx Ground motion to decertify the class (seeking to exclude drivers who hired others to handle routes and arguing that "full time" drivers would be too difficult to...
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