Whitlock v. FSL Mgmt., LLC

• Decision Date: 14 December 2016
• Docket Number: No. 16-5086,16-5086
• Citation: 843 F.3d 1084
• Parties: William Whitlock ; David Skyrm; Kristin Moore ; Holly Goodman; Gary Muncy; Michael Brown, Plaintiffs–Appellees, v. FSL Management, LLC; Entertainment Concepts Investors Services, LLC; Cordish Operating Ventures, LLC; Entertainment Consulting Services, LLC ; FSH Management, LLC, Defendants–Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

843 F.3d 1084

William Whitlock ; David Skyrm; Kristin Moore ; Holly Goodman; Gary Muncy; Michael Brown, Plaintiffs–Appellees,

v.FSL Management, LLC; Entertainment Concepts Investors Services, LLC; Cordish Operating Ventures, LLC; Entertainment Consulting Services, LLC ; FSH Management, LLC, Defendants–Appellants.

No. 16-5086

United States Court of Appeals, Sixth Circuit.

Argued: October 20, 2016

Decided and Filed: December 14, 2016

ARGUED: Clark C. Johnson, STITES & HARBISON PLLC, Louisville, Kentucky, for Appellants. Michele D. Henry, CRAIG HENRY PLC, Louisville, Kentucky, for Appellees. ON BRIEF: Clark C. Johnson, Chadwick A. McTighe, Jeffrey S. Moad, STITES & HARBISON PLLC, Louisville, Kentucky, for Appellants. Michele D. Henry, CRAIG HENRY PLC, Louisville, Kentucky, for Appellees.

Before: GUY, BOGGS, and GRIFFIN, Circuit Judges.

OPINION

BOGGS, Circuit Judge.

This appeal arises out of a class certification and a court-approved class-action settlement. The defendants-appellants, who were parties to the settlement, challenge both of these determinations, arguing that because the underlying Kentucky state-law cause of action does not support class relief, the district court was required to reject the settlement and decertify the class. Whatever the substance of Kentucky state law, a point which this court need not decide here, we hold that it does not affect the ability of the district court to enforce a binding settlement agreement. For this reason, we affirm the decision of the district court and uphold the disputed settlement agreement.

I

A

In 2010, plaintiffs William Whitlock, David Skyrm, James Middleton, and Kristin Moore brought suit in Kentucky state court against the defendants, FSL Management, LLC, Entertainment Concepts Investors, LLC, and Cordish Operating Ventures, LLC. The plaintiffs were former employees of various establishments that operate in "Fourth Street Live," an entertainment district located in downtown Louisville, KY that was managed by the defendants. The plaintiffs individually alleged violations of the Kentucky Wage and Hour Act, KRS § 337.385, against the defendants for their policies regarding off-the-clock work and mandatory tip-pooling. Citing proper diversity jurisdiction, defendants removed the action to federal court, whereupon the plaintiffs amended their complaint to include an additional defendant and to seek relief as a class. The court granted leave for the plaintiffs to amend their complaint, and the litigation proceeded as a class-action suit.

In 2012, the district court granted class certification to the plaintiffs, finding that they had both met the requirements of Rule 23(a) and fell within one of the enumerated subcategories of Rule 23(b). The defendants successfully stayed the class-action litigation while they pursued interlocutory review in this court, but their petition for review was denied. In re FSL Mgmt., LLC , No. 12-0509 (6th Cir. Jan 31, 2013). In April 2013, the defendants filed a motion in the district court to reconsider its prior order certifying the class. Specifically, the defendants argued that the Supreme Court's decision in Comcast Corp. v. Behrend , ––– U.S. ––––, 133 S.Ct. 1426, 185 L.Ed.2d 515 (2013), coupled with its decision to vacate two related class-certification orders, see In re Whirlpool Corp. Front–Loading Washer Products Liability Lit. , 678 F.3d 409 (6th Cir. 2012), vacated and remanded , ––– U.S. ––––, 133 S.Ct. 1722, 185 L.Ed.2d 782 (2013) ; Ross v. RBS Citizens, N.A. , 667 F.3d 900 (7th Cir. 2012), vacated and remanded , ––– U.S. ––––, 133 S.Ct. 1722, 185 L.Ed.2d 782 (2013), supported reconsideration of the plaintiffs' class certification. The district court denied the motion to reconsider class certification, and the parties subsequently began settlement discussions.

In May 2014, the parties reached an agreement as to the financial component of the settlement. It would take them almost another year, however, until the parties could reach an agreement regarding the settlement's non-monetary terms. Emails between the parties suggest a final agreement was reached as to all of the settlement's terms sometime around March 19 and March 20, 2015. On March 20, 2015, the parties filed a joint status report with the district court declaring that they had "agreed to the terms of a settlement agreement and anticipate filing the formal settlement documents ... by April 17, 2015."

Soon after this joint status report had been filed with the court, the defendants became aware of a February 27, 2015 decision by the Kentucky Court of Appeals, McCann v. Sullivan University Systems, Inc. , No. 2014-CA-000392-ME, 2015 Ky. App. Unpub. LEXIS 862 (Ky. App. Feb. 27, 2015). McCann held that KRS § 337.385, the same provision under which the plaintiffs had brought suit in this case, could not support class-action claims. Id. at *9. On March 26, 2015, the plaintiffs in McCann filed a motion for discretionary review with the Kentucky Supreme Court. McCann v. Sullivan Univ. Sys. Inc. , 2015-SC-000144. Buoyed by this discovery, the defendants filed a motion with the district court on April 15, 2015, seeking to stay approval of the settlement agreement in light of McCann . When the court denied this motion and granted preliminary approval of the settlement, the defendants again brought an appeal to this court. In an order dated October 27, 2015, we denied their second appeal as untimely, reasoning that the defendants had not challenged an appealable class-certification order in accordance with Rule 23(f). In our denial, we made it clear that while their appeal was untimely, the defendants remained free to move the district court "to decertify the class on the basis of new developments." In re FSL Mgmt., LLC , No. 15-0504 (6th Cir. Oct. 27, 2015) (order).

Following our advice, the defendants filed a motion with the district court, pursuant to Fed. R. Civ. P. 23(c)(1)(C), to decertify the class based on the rule and the Kentucky Court of Appeals decision in McCann . The plaintiffs urged the district court to maintain certification and grant final approval to the proposed class settlement. On December 22, 2015, the district court filed a memorandum opinion and order denying the defendants' motion to decertify the class, and granting final approval of the plaintiffs' proposed class action settlement. In its opinion, the district court concluded that, regardless of the present meaning of KRS § 337.385,¹ it was bound to maintain class certification and enforce the settlement agreement as "a binding contract under Kentucky law." In so doing, the court below rejected the defendants' two arguments: 1) that both Rule 23 of the Federal Rules of Civil Procedure and the Rules Enabling Act require decertifying the class in light of KRS § 337.385's prohibition against class-action litigation; and 2) that Rule 23(e) requires the district court to refuse to enforce the class-action settlement in light of the same state statutory prohibition. Defendants raise both in this appeal.

II

As a preliminary issue, we must first decide whether KRS § 337.385 prohibits class-action litigation. Although the district court did not definitively decide this point, we review the application of state law de novo .

Matilla v. South Kentucky Rural Elec. Co–op. Corp. , 240 Fed.Appx. 35, 38 (6th Cir. 2007).

A

When a federal court is required to apply state law, we are required to do so in accordance with the controlling decisions of that state's highest court. See Allstate Ins. Co. v. Thrifty Rent-A-Car Sys., Inc. , 249 F.3d 450, 453–54 (6th Cir. 2001). If the state's highest court has not yet addressed the issue, "we must predict how that court would rule, by looking to ‘all available data.’ " Prestige Cas. Co. v. Michigan Mut. Ins. Co. , 99 F.3d 1340, 1348 (6th Cir. 1996) (quoting Kingsley Assoc. v. Moll PlastiCrafters, Inc. , 65 F.3d 498, 507 (6th Cir. 1995) ). "Relevant data include decisions of the state appellate courts, and those decisions should not be disregarded unless we are presented with persuasive data that the [state supreme court] would decide otherwise." Kings l ey Assoc. , 65 F.3d at 507.

We are asked to exercise our powers of divination in this case. Neither party contends that the Kentucky Supreme Court has rendered a binding decision on this issue. See Appellants' Br. at 14; Appellees' Br. at 19. Rather, both parties recognize that the question will be definitively answered when the Kentucky Supreme Court hands down its decision in McCann v. Sullivan Univ. Sys. , No. 2014–CA–000392–ME, 2015 Ky. App. Unpub. LEXIS 862 (Ky. App. Feb. 27, 2015), cert. granted , 2015-SC-000144-DG, 2015 Ky. LEXIS 1970 (Ky. Oct. 21, 2015). Consequently, they each point to a range of cases in order to persuade this court how the Kentucky Supreme Court will rule. Neither party makes a particularly compelling showing.

But we do not need to decide this issue today. Rather than venture into the wilderness of undecided Kentucky state law, a practice which is best left to the capable jurists of the Kentucky Supreme Court, we assume without deciding that the appellants' view of Kentucky state law is correct. We nonetheless conclude that a post-settlement change in the law does not alter the binding nature of the parties' settlement agreement, nor does it violate Rule 23 of the Federal Rules of Civil Procedure or the Rules Enabling Act.

III

We review a district court's decision to certify a class for abuse of discretion. See Randleman v. Fidelity Nat. Title Ins. Co. , 646 F.3d 347, 351 (6th Cir. 2011). "A district court abuses its discretion ‘when [it] relies on erroneous findings of fact, applies the wrong legal standard, misapplies the correct legal standard when reaching a conclusion, or makes a clear error of judgment.’ " Beattie v. CenturyTel, Inc. , 511 F.3d 554, 560 (6th Cir. 2007) (alteration in original) (quoting Reeb v. Ohio Dep't of Rehab. and Corr. , 435 F.3d 639, 644 (6th Cir. 2006) ).

A

The...