Zegers v. Countrywide Mortg. Ventures, LLC

• Decision Date: 28 July 2008
• Docket Number: Case No. 6:07-cv-1893-Orl-22DAB.
• Citation: 569 F.Supp.2d 1259
• Parties: Jean ZEGERS, Suzanne Peterson, and Doug Shukers, Plaintiffs, v. COUNTRYWIDE MORTGAGE VENTURES, LLC, d/b/a Countrywide KB Home Loans, and Countrywide Home Loans, Inc., Defendants.
• Court: U.S. District Court — Middle District of Florida

569 F.Supp.2d 1259

Jean ZEGERS, Suzanne Peterson, and Doug Shukers, Plaintiffs, v. COUNTRYWIDE MORTGAGE VENTURES, LLC, d/b/a Countrywide KB Home Loans, and Countrywide Home Loans, Inc., Defendants.

Case No. 6:07-cv-1893-Orl-22DAB.

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

July 28, 2008.

COPYRIGHT MATERIAL OMITTED

David H. Spalter, Jill S. Schwartz & Associates, PA, Winter Park, FL, for Plaintiffs.

Lori Anne Brown, Littler Mendelson, PC, Miami, FL, Kimberly D. Webb, Littler Mendelson, PC, Orlando, FL, for Defendants.

ORDER

ANNE C. CONWAY, District Judge.

This cause comes before the Court on a Report & Recommendation ("R & R") by United States Magistrate Judge David A. Baker regarding the Joint Motion for Approval of Proposed Settlement. Doc. No. 37. Plaintiffs¹ have filed Objections to the R & R (Doc. No. 40), and Defendants failed to respond. Based on an independent, de novo review of the R & R, the Plaintiffs' submissions, and the relevant case law, the Court ADOPTS the R & R IN PART and proposes a fee distribution that would allow the Court to approve the settlement.

Analysis

I. Plaintiffs' Objection that the District Court Lacks Jurisdiction is Overruled

Plaintiffs argue that where no fee dispute exists, the district court lacks jurisdiction over the firm's contract with Plaintiffs. Doc. No. 40 p. 3. While Plaintiffs are correct that the parties did not ask the Court to review the fee arrangement (id. at p. 4), the FLSA states that in adjudicating a case, "[t]he Court ... shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney's fee to be paid by the defendant, and costs of the action." 29 U.S.C. § 216(b) (emphasis added). This provision covers cases that continue to judgment. Id. Settlement of FLSA cases is only allowed when supervised by the Department of Labor or subject to Court approval in a private action. Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350, 1353-54 (11th Cir.1982). The FLSA requires Court approval of settlement of a private lawsuit to ensure that there is "some assurance of an adversarial context." Id. Thus, even in the settlement context, it remains the Court's duty to see that a "reasonable attorney's fee" is paid by the Defendants. See 29 U.S.C. § 216(b).

Plaintiffs are correct that there is a difference between the Court determining the fee amount to be paid by the Defendants and the Court determining what the Plaintiffs may ultimately turn over to their lawyers. Doc. No. 40 p. 7 n. 4. However, permitting Plaintiffs and their counsel to make these kinds of contingent agreements without Court approval would thwart both the intent of Congress that "the wronged employee should receive his full wages" and the requirement that settlements must be approved by the Court. See Maddrix v. Dize, 153 F.2d 274, 275-76 (4th Cir.1946); see also Lynn's Food, 679 F.2d at 1352 (contracting away FLSA rights is specifically prohibited); United Slate, Tile & Composition Roofers v. G & M Roofing & Sheet Metal Co., Inc., 732 F.2d 495, 503-04 (6th Cir.1984) ("The determination of a reasonable fee is to be conducted by the district court regardless of any contract between plaintiff and plaintiff's counsel."). For these reasons, the Court holds that it is within the jurisdiction of the Court to review the attorney's fee in a FLSA settlement.

Plaintiffs cite Brown v. Watkins Motor Lines, Inc., 596 F.2d 129 (5th Cir.1979),² for the proposition that the Court lacks jurisdiction. However, Brown, 596 F.2d at 130-31, was not a FLSA case but a tort suit involving damages awarded to a minor. Brown does not control in a FLSA case, where Congress intended Court oversight of the settlement to ensure an adversarial environment and complete compensation to plaintiffs. Lynn's Food, 679 F.2d at 1353-54. Furthermore, the dissent in Brown pointed out that the Fifth Circuit had twice decreed that "where an attorney recovers a fund in a suit under a contract with a client providing that he shall be compensated only out of the fund he creates, the court having jurisdiction of the subject matter of the suit has power to fix the attorney's compensation and direct its payment out of the fund." Brown, 596 F.2d at 133 (citing Garrett v. McRee, 201 F.2d 250, 253 (10th Cir.1953) and Cappel v. Adams, 434 F.2d 1278, 1279 (5th Cir. 1970)). Because the Court has jurisdiction over the settlement and award of fees under the FLSA, the Court overrules Plaintiffs' objection based on jurisdiction.³

II. Plaintiffs' Objection that the Eleventh Circuit's Decision in Lynn's Food Does Not Convey Authority to Scrutinize the Fee Agreement is Overruled

Plaintiffs argue that Lynn's Food, 679 F.2d at 1352-53, does not control the fee question, because nothing in that case "suggests that such a review was intended." Doc. No. 40 p. 5. Plaintiffs further argue that the intent of Lynn's Food was to protect potential plaintiffs from their employers, not from their attorneys. Id. at p. 6. However, the intent to ensure a reasonable attorney's fee and just compensation to Plaintiff is embodied in Lynn's Food, 679 F.2d at 1352-53, and is stated in the FLSA itself. See 29 U.S.C. § 216(b). Where, as here, there is a settlement amount of which Plaintiffs will take what is not given to the attorneys, the need to protect Plaintiffs' recovery also includes the need to ensure attorney's fees are reasonable.

Plaintiffs also fail to cite any case approving a forty percent contingent fee in a FLSA case and ignore this Court's prior orders specifically disapproving two FLSA case settlements because of forty percent contingency fee arrangements. See Park v. Am. Servs. of Cent. Fla., Inc., No. 6:06cv882, 2007 WL 1626349, at *5 (M.D. Fla. June 5, 2007) (Conway, J.); Siegenthaler v. Kane Furniture Co. of Ormond Reach, Inc., No. 6:07cv173, 2007 WL 1893906, at *2, *4 (M.D.Fla. July 2, 2007) (Conway, J.). For these reasons, Plaintiffs' Objection based on Lynn's Food is overruled.

III. Plaintiffs' Objection that the Magistrate's Reliance on Maddrix is Misplaced is Overruled

In Maddrix, 153 F.2d at 275-76, the Fourth Circuit stated that, based on the language of the FLSA, "Congress intended that the wronged employee should receive his full wage plus the penalty without incurring any expense for legal fees or costs." Plaintiffs are correct to point out that Maddrix addressed the validity of a judgment against a defendant including fees based on attorney services performed on appeal, rather than fees subtracted from a settlement amount. Doc. No. 40 p. 7. But, the Fourth Circuit's statement in Maddrix, 153 F.2d at 275-76, that the purpose of the FLSA is to compensate plaintiffs remains valid.

Plaintiffs argue that a footnote in the Fourth Circuit's decision in Lyle v. Food Lion, Inc., 954 F.2d 984, 989 n. 2 (4th Cir.1992), is indicative that contingency fee agreements are valid in the FLSA settlement context. Doc. No. 40 pp. 7, 8. The Fourth Circuit in Food Lion, 954 F.2d at 989 n. 2, stated that its "holding ... controls only what [defendant] must pay [plaintiffs] and not what [plaintiffs] may be contractually obligated to pay their attorney under a contingent-fee agreement." This footnote does not approve contingency fees in FLSA cases but merely states that the Fourth Circuit is not addressing a contingent fee scenario. Moreover, the actual holding of Food Lion was that the lodestar, not a twenty percent contingency fee, must control what the defendant had to pay plaintiffs for fees. Id. at 988-89.

According to Plaintiffs' objection, the Supreme Court's holding in Venegas v. Mitchell, 495 U.S. 82, 87-88, 110 S.Ct. 1679, 109 L.Ed.2d 74 (1990), should apply to the FLSA. Doc. No. 40 p. 8. In Venegas, 495 U.S. at 87-88, 110 S.Ct. 1679, the Supreme Court held that 42 U.S.C. § 1988 does not invalidate contingent-fee contracts that would require a prevailing plaintiff to pay his attorney more than the statutory award against the defendant. However, as the Magistrate Judge pointed out, the FLSA is not like section 1988. Doc. No. 37 p. 4. FLSA plaintiffs cannot bargain away their rights (Lynn's Food, 679 F.2d at 1352 (citing Brooklyn Savings Bank v. O'Neil, 324 U.S. 697, 706, 65 S.Ct. 895, 89 L.Ed. 1296 (1945))), while section 1988 plaintiffs can. FLSA settlements are only permitted if they are supervised by the Department of Labor or if they are part of a private suit and Court-approved. Doc. No. 37 p. 4; Lynn's Food, 679 F.2d at 1352-53. The language of the FLSA and case law interpreting it indicate that Congress intended that FLSA plaintiffs receive damages as well as reasonable attorney's fees from the defendant. Id.; 29 U.S.C. § 216(b). Having a forty percent contingency fee taken out of the award to the plaintiff would contravene the intent of that section. Doc. No. 37 p. 4 (citing Maddrix, 153 F.2d at 275-76, United Slate, 732 F.2d at 502, Skidmore v. John J. Casale, Inc., 160 F.2d 527, 531 (2d Cir. 1947), and Burke v. Mesta Mach. Co., 79 F.Supp. 588, 615 (W.D.Pa.1948)). Thus, the Supreme Court's decision in Venegas regarding actions brought under section 1988 is inapplicable to FLSA cases. For these reasons, Plaintiffs' third objection is overruled.

IV. Plaintiffs' Objection that the Contingency Fee Agreement Does Not Contravene Public Policy is Overruled

Plaintiffs argue that the individuals "who seek counsel to obtain recovery on unpaid minimum wages or overtime compensation are often unemployed, and typically lack the resources to fund a federal action by paying hourly fees." Doc. No. 40 p. 8. In light of the fact that FLSA filings in the Orlando Division of the Middle District of Florida have quadrupled over the last four years (see Case No. 6:08mc49, Doc. No. 1 p. 1), the Court holds that the concern that plaintiffs will not be able to find representation is adequately addressed by the fee provisions of the FLSA itself. Thus, the Court overrules Plaintiffs' objection based on...