Dkt 063 Memo in Supp of Jnt Mtn for Prelim Approval

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UNITED STATES DISTRICT COURT

DISTRICT OF MINNESOTA

Duniyo Hussein, et al.,

on behalf of themselves,

the Proposed Rule 23 Class, and

others similarly situated,

Plaintiffs, Civil No. 15-CV-2498 (SRN/BRT)

JOINT MEMORANDUM IN v. SUPPORT OF PRELIMINARY

APPROVAL OF PROPOSED

Capital Building Services Group., Inc., CLASS ACTION SETTLEMENT

Defendant.

INTRODUCTION

Plaintiffs Duniyo Hussein (“Plaintiff Hussein”), Naima Omar Issa (“Plaintiff

Issa”), Leyla Yusuf (“Plaintiff Yusuf”), Raymond Deshler (“Plaintiff Deshler”),

Assiongbonvi “Luc” Kangnigan (“Plaintiff Kangnigan”), Melvin Holmes (“Plaintiff

Holmes”), Abraham Quevedo Orantes (“Plaintiff Quevedo”), and Leticia Zuniga

Escamilla (“Plaintiff Zuniga”), (collectively, the “Named Plaintiffs” or “Plaintiffs”),

individually and on behalf of current and former employees of Defendant Capital

Building Services Group, Inc. (“Capital” or “Defendant”) who worked as cleaners

(including crew leads) in Minnesota from May 20, 2012, through January 15, 2016,

(“Class Members” or “Proposed Rule 23 Class”), jointly with Defendant, seek

preliminary approval of a proposed settlement of this action which alleges unlawful pay

practices arising under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq.,

CASE 0:15-cv-02498-SRN-BRT Document 63 Filed 02/16/16 of 43

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Minnesota Fair Labor Standards Act, Minn. Stat. § 177.24, and Minnesota Payment of

Wages Act, Minn. Stat. § 181.001, et seq. Plaintiffs’ and Defendant’s (collectively the

“Parties”) Stipulation of Settlement resolves all of the Named Plaintiffs’ and Class

Members’ stated claims against Defendant in exchange for the payment by Capital of

$425,000.

The proposed settlement and plan of distribution are the product of an arms-length

mediation and non-collusive negotiations by experienced and informed counsel and fall

well within the range of possible approval as the terms are “fair, reasonable, and

adequate.” Fed. R. Civ. P. 23(e)(2). Accordingly, the Parties request the Court: (1)

preliminarily approve the settlement; (2) certify Plaintiffs Hussein, Issa, Yusuf, Deshler,

Kangnigan, Holmes, Quevedo, and Zuniga as the Class Representatives; (3) preliminarily

certify the Proposed FLSA collective and Rule 23 Class for purposes of settlement; (4)

appoint Paul Lukas, Adam Hansen, and Carl Engstrom of Nichols Kaster, PLLP, as Class

Counsel; (5) approve, and direct mailing of, the proposed Notice of Settlement (“Class

Notice”) to the Class; and (6) schedule a final approval hearing on the question of

whether the proposed settlement should be finally approved as fair, reasonable, and

adequate as to the members of the Class.

PROCEDURAL AND FACTUAL HISTORY

I. LITIGATION, DISCOVERY, MEDIATION AND SETTLEMENT.

A. Litigation Procedural History.

On May 20, 2015, Plaintiffs filed this putative FLSA collective and Rule 23 class

action against Defendant. (Compl. ¶ 1, ECF No. 1.) Plaintiffs alleged that Defendant


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failed to pay proper minimum wage and overtime compensation in violation of the

federal FLSA and that Defendant violated several Minnesota state wage and hour laws.

(Id. ¶¶ 10–11.) Specifically, Plaintiffs alleged that Defendant violated: the Fair Labor

Standards Act (“FLSA”), 29 U.S.C. §§ 206, 207, Minnesota Fair Labor Standards Act

(“MFLSA”), Minn. Stat. §§ 177.23, .24, .25, .255, and .30, and the Minnesota Payment

of Wages Act (“PWA”), Minn. Stat. §§ 181.032, .101, .13, and .14. (Id. ¶¶ 98–175.)

Defendant filed an Answer denying all of Plaintiffs’ allegations. (ECF No. 29.)

In the Complaint, the Plaintiffs alleged Capital failed to pay employees for all

hours worked, resulting in minimum wage, gap time, and overtime violations under the

FLSA and MNFLSA. (Compl. ¶¶ 98-152, ECF No. 1.) Plaintiffs allege that meal breaks

are systematically deducted from employees’ hours worked, even when those breaks are

not actually taken. (Id.) Plaintiffs allege that some employees have to purchase their own

cleaning supplies, and these unreimbursed expenses cause employees’ wages to drop

even further below minimum wage. (Id.) Plaintiffs allege that when employees are asked

to clean a store where they do not normally work, their time is seldom tracked, and often

unpaid. (Id.) Plaintiffs allege that travel time between stores is not compensated. (Id.)

Plaintiffs allege that workers have no choice but to be paid with debit cards, and thus

must pay ATM fees in order to access their own wages. (Id.) Plaintiffs allege that

beginning in their second pay period, employees’ only other option is to receive direct

deposit, which is not an option for workers who do not have bank accounts. (Id.)

Plaintiffs allege that on numerous occasions, terminated employees were not paid for

work performed during their final pay periods. (Id.) Last, Plaintiffs allege that Capital


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failed to maintain accurate employment records and supply pay stubs (or electronic

access to pay stubs) to employees. (Id.) Plaintiffs seek damages, equitable relief,

injunctive relief, penalties, attorneys’ fees, and costs, on their own behalf and on behalf

of all those similarly situated.

Defendant contends that all of Capital’s employees were compensated in

compliance with the law and that any alleged failure to pay wages was not willful.

Defendant has denied, and continues to deny, each of the claims and contentions alleged

by the Plaintiffs in the Action, and so it denies any wrongdoing or legal liability arising

from any facts or conduct alleged in the Action. Nevertheless, Defendant has concluded

that further litigation would be protracted and expensive and would divert management

and employee time. Defendant has taken into account the uncertainty and risk inherent in

litigation and concluded it is appropriate to fully and finally settle the Action in the

manner, and upon the terms, set forth in the settlement.

On June 3, 2015, the Plaintiffs filed their Motion for Conditional Certification and

Notice, Class Certification, and a Preliminary Injunction. (ECF No. 5.) Defendant

opposed Plaintiffs’ motions, and submitted voluminous testimonial and documentary

evidence setting forth Defendant’s responses to Plaintiffs’ allegations in detail. (ECF

Nos. 18-23.) On November 20, 2015, this Court granted Plaintiffs’ motion for conditional

certification and deferred ruling on Plaintiffs’ motions for class certification and

injunctive relief. (ECF 58.) With mediation pending, the parties entered into a private

agreement to defer mailing the court-approved notice and toll the claims of all class

members until after mediation. (Hansen Decl. ¶3) Because the discussions produced a


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settlement, Plaintiffs’ counsel did not send conditional certification notice to the class.

(Hansen Decl. ¶4)

B. Discovery Efforts.

The Parties have engaged in limited discovery. (Hansen Decl. ¶5) In anticipation

of mediation, Capital produced all payroll and timekeeping data for all members of the

class. (Hansen Decl. ¶6) In addition, the parties agreed on a methodology whereby both

parties could ask questions of the other parties in order to clarify points of dispute.

(Hansen Decl. ¶7) During the period of discovery, for example, Defendant provided

detailed information on the nature of its timekeeping and payroll data, where the data

resides, and who may access or change the data. (Hansen Decl. ¶8) Defendant also

provided discovery on Defendant’s policies related to payment, travel time, meal breaks,

timekeeping, and providing access to paystubs. (Hansen Decl. ¶9) Last, Defendant

produced detailed financial information relating to Capital’s assets, liabilities, debts,

accounts, and contractual relationships. (Hansen Decl. ¶10) The Parties agreed to defer

further discovery and associated disputes in favor of settlement. (Hansen Decl. ¶11)

In pursuing claims at issue in the Action, and in evaluating the merits of the

settlement, Class Counsel have (1) reviewed thousands of pages of data and documents,

(2) conducted over a dozen witness interviews, (3) held meetings and conferences

between representatives of the Parties, (4) researched federal and Minnesota law, (5)

investigated facts regarding the Class Members’ claims, (6) gathered declarations, (7)

researched and investigated potential defenses to Plaintiffs’ claims, and (8) analyzed the

damages incurred by the Class. (Hansen Decl. ¶12)


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C. Mediation History.

On December 11, 2015, the Parties participated in a full-day mediation session

conducted by the Honorable Arthur Boylan (Ret.). (Hansen Decl. ¶13) Following the

mediation, the parties continued negotiating over a variety of sensitive monetary and non-

monetary terms. (Hansen Decl. ¶14) On January 22, 2016, as a result of these arm’s

length negotiations, the Parties agreed to the settlement. (Hansen Decl. ¶15) The Parties

have worked diligently to resolve numerous issues regarding settlement. (Hansen Decl.

¶16) The Parties believe they are fully and adequately informed of all facts necessary to

evaluate the case for settlement. (Id.)

D. Summary of Plaintiffs’ Claims And Defendant’s Defenses

Defendant is in the business of providing commercial cleaning services to retail,

corporate, commercial, industrial, banking, and educational venues. (ECF No, 8-4, Ex.

11.) Defendant maintains its corporate office in Lake Zurich, Illinois. (ECF No, 8-4, Ex.

12.) Capital services more than 300 facilities in 25 states. (ECF No, 8-4, Ex. 13.)

Capital has cleaning contracts with twenty-seven facilities in Minnesota. (ECF No,

8-2, Ex. 8.) Capital currently employs approximately 50 cleaners (including crew leaders)

in Minnesota. (Id. ¶ 21.) Given the high turnover among cleaners, Defendant has likely

employed over several hundred cleaners (including crew leaders) within the three years

prior to the filing of the Complaint. (Id.)

Plaintiffs all work or worked as cleaners (including crew leaders) for Defendant

within the three years prior to the filing of the Complaint. (ECF No, 8-2, Hussein Decl. ¶


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2, Ex. 2; ECF No, 8-2, Issa Decl. ¶ 2, Ex. 3; ECF No, 8-2, Yusuf Decl. ¶ 2, Ex. 4; ECF

No, 8-2, Deshler Decl. ¶ 2, Ex. 5; ECF No, 8-2, Kangnigan Decl. ¶ 2, Ex. 6; ECF No, 8-

2, Holmes Decl. ¶¶ 2, 5, Ex. 7; ECF No, 8-2, Quevedo Decl. ¶ 2, Ex. 8; ECF No, 8-2,

Zuniga Decl. ¶ 2, Ex. 9.) Plaintiffs have worked primarily at eight of the twenty-seven

Minnesota department stores cleaned by Capital. (Id.) However, Plaintiffs have at various

points worked at nearly every store cleaned by Capital in Minnesota. (Id.)

Plaintiffs allege that Capital has a top-down organizational structure. All policies

related to timekeeping and payroll emanate from Capital’s corporate office. (ECF No, 8-

2, Quevedo Decl. ¶ 15.) In Minnesota, Capital has appointed a single district manager to

implement and enforce these policies across the state while also managing day-to-day

cleaning operations state-wide. (Id. ¶ 15.) The district manager’s duties include setting

employees’ schedules, inputting employees’ hours for payroll, and handling all employee

disputes relating to compensation. (Id. ¶¶ 8–10, 17.) The district manager is responsible

for making all hiring and firing decisions. (Id. ¶ 17–19.) The district manager has

exclusive responsibility for everything related to timekeeping and payroll. (Id. ¶¶ 8–10,

17–19.)

Below the district manager is the area manager. (Id. ¶ 18.) The area manager’s

primary duty is to travel between stores throughout Minnesota to perform cleaning tasks

when employees do not show up for work or extra cleaning is necessary at a particular

store. (Id. ¶¶ 3, 18.) The area manager is paid on a salary basis, though the legality of this

designation of area managers as exempt from the overtime requirements of the FLSA is

contested. (Id. ¶ 5; Compl. ¶¶ 192–99, ECF No. 1.) Beneath the area manager is the crew


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leader. (ECF No, 8-2, Quevedo Decl. ¶ 19.) The crew leader bears primary responsibility

for the cleanliness of a store, but has no managerial responsibilities other than

occasionally delegating cleaning tasks to other cleaners. (Id.) Crew leaders may be

required to travel between stores to cover for absent cleaners. (ECF No, 8-2, Holmes

Decl. ¶ 5, Ex. 7.)

Given Capital’s organizational structure and the division of responsibilities among

managers, Plaintiffs allege that all Capital cleaners working in Minnesota were subject to

only one set of policies relating to timekeeping and payroll that were set by Capital’s

corporate office. Those policies were then implemented and enforced throughout

Minnesota by one person–the district manager. Plaintiffs allege these policies all affected

them in a similar manner, because they are all non-exempt employees paid on an hourly

basis at similar wage levels, and all share the same primary job duty—cleaning Macy’s

and Herberger’s department stores. (ECF No, 8-2, Hussein Decl. ¶ 2, Ex. 2; ECF No, 8-2,

Issa Decl. ¶ 2, Ex. 3; ECF No, 8-2, Yusuf Decl. ¶ 2, Ex. 4; ECF No, 8-2, Deshler Decl. ¶

2, Ex. 5; ECF No, 8-2, Kangnigan Decl. ¶ 2, Ex. 6; ECF No, 8-2, Holmes Decl. ¶¶ 2–3,

Ex. 7; ECF No, 8-2, Quevedo Decl. ¶¶ 2, 5, 11, Ex. 8; ECF No, 8-2, Zuniga Decl. ¶ 2, Ex.

9.)

1. Plaintiffs’ Allegations Regarding Earnings Statements

Plaintiffs allege that none of the Plaintiffs or class members received earnings

statement as required by Minnesota law. Minn. Stat. § 181.032 states, “At the end of each

pay period, the employer shall provide each employee an earnings statement, either in

writing or by electronic means, covering that pay period.” The earnings statement must


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include, among other information, the dates covered, the hourly rate of pay, the number

of hours worked, gross pay, all deductions, and net pay. Minn. Stat. § 181.032(b). If an

employer chooses to provide employees electronic paystubs, each employee must be

provided with access “to an employer-owned computer during an employee’s regular

working hours to review and print earnings statements.” Minn. Stat. § 181.032(a). An

employer must provide statements in written form upon receiving notice that an

employee prefers written statements. Minn. Stat. § 181.032(c).

Defendant denies the allegation that none of the Plaintiffs or class members

received earnings statements as required by Minnesota law. In response, Defendant

argues that Minnesota law gives employers the option of providing earnings statements to

employees “either in writing or by electronic means,” Minn. Stat. § 181.032(a), and that

employers must provide the earnings statement to the employee in writing, rather than by

electronic means, only “if the employer has received at least 24 hours notice from an

employee that the employee would like to receive earnings statements in written form,”

Minn. Stat. § 181.032(c). Defendant argues that it has complied with this legal

requirement. The two plaintiffs who requested written earning statements received them

from Capital. Three Plaintiffs who allege they never received written earnings statements

never requested them in the first place.

2. Plaintiffs’ Allegations Regarding Section 181.032

Plaintiffs also allege that Defendant violated Section 181.032 in a number of ways.

According to Plaintiffs, until early 2015, cleaners were not provided with any form of

earnings statement, written or electronic. (ECF No, 8-2, Hussein Decl. ¶ 3, Ex. 2; ECF


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No, 8-2, Issa Decl. ¶ 3, Ex. 3; ECF No, 8-2, Yusuf Decl. ¶ 3, Ex. 4; ECF No, 8-2, Deshler

Decl. ¶ 3, Ex. 5; ECF No, 8-2, Kangnigan Decl. ¶ 3, Ex. 6; ECF No, 8-2, Holmes Decl. ¶

4, Ex. 7; ECF No, 8-2, Quevedo Decl. ¶¶ 5–8, Ex. 8; ECF No, 8-2, Zuniga Decl. ¶ 3, Ex.

9.) Beginning in early 2015, when Capital switched its payroll provider, employees were

given the ability to view their earnings statements online. (ECF No, 8-2, Holmes Decl. ¶

4, Ex. 7; ECF No, 8-2, Quevedo Decl. ¶ 6, Ex. 8.) However, employees are not given

access to a work-owned computer to view or print these earnings statements during

working hours, as the law requires. (ECF No, 8-2, Hussein Decl. ¶ 3, Ex. 2; ECF No, 8-2,

Issa Decl. ¶ 3, Ex. 3; ECF No, 8-2, Yusuf Decl. ¶ 3, Ex. 4; ECF No, 8-2, Deshler Decl. ¶

3, Ex. 5; ECF No, 8-2, Kangnigan Decl. ¶ 3, Ex. 6; ECF No, 8-2, Holmes Decl. ¶ 4, Ex.

7; ECF No, 8-2, Quevedo Decl. ¶¶ 6–7, 20, Ex. 8; ECF No, 8-2, Zuniga Decl. ¶ 3, Ex. 9.)

In fact, Plaintiffs either do not have access to a computer during their working hours or

are not allowed to use whatever computer might be available. (ECF No, 8-2, Quevedo

Decl. ¶¶ 7, 20, Ex. 8.) Furthermore, Plaintiffs who have attempted to access their online

earnings statements have not thus far been able to view their hours worked or hourly

wage rate. (ECF No, 8-2, Holmes Decl. ¶ 4, Ex. 7; ECF No, 8-2, Quevedo Decl. ¶ 6, Ex.

8.) But even if these electronic earnings statements contained the information required by

Minn. Stat. § 181.032, Plaintiffs argue, Defendant would still be in violation of the statute

because employees are not able to view or print these statements using an employer-

owned computer during their working hours. Minn. Stat. § 181.032.

Defendant counters, however, that both the electronic and written earnings it

provided its employees include all of the elements required by Minn. Stat. § 181.032(b),


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including: (i) the employee name; (ii) the hourly rate of pay; (iii) the total number of

hours worked; (iv) the total amount of gross pay; (v) a list of deductions; (vi) the net

amount of pay; (vii) the date on which the pay period ends; and (viii) the legal name of

the employer. (K.Z. Decl., Exs. 6,7.) For example, the electronic earning statement for

Plaintiff Melvin Holmes for the pay period ending on December 31, 2015, shows that Mr.

Holmes received $9.00 per hour for 80 hours of straight-time and $13.50 per hour for

35.50 hours of overtime during that pay period. (Id., Ex. 7.) It also shows the amounts

that Capital withheld the mandatory tax withholding as well as an additional tax levy that

Capital was required to withhold due to Mr. Holmes’ failure to pay taxes in previous

years.

3. Plaintiff’s Recordkeeping Allegations

Plaintiffs next allege that Capital does not maintain accurate records as required by

Minnesota and federal labor law. Employers are required to maintain records of all hours

worked by an employee each day and each workweek. Minn. Stat. § 177.30; Minn. R.

5200.0100. Plaintiff alleges Defendant fails to meet this obligation in a number of ways.

First, Defendant sometimes simply fails to record entire shifts that are worked. (ECF No,

8-2, Hussein Decl. ¶ 7, Ex. 2; ECF No, 8-2, Yusuf Decl. ¶¶ 5–6, Ex. 4; ECF No, 8-2,

Holmes Decl. ¶ 7, Ex. 7.) Second, Defendant routinely underreports Plaintiffs’ hours

worked. (ECF No, 8-2, Hussein Decl. ¶ 4, Ex. 2; ECF No, 8-2, Issa Decl. ¶ 4, Ex. 3; ECF

No, 8-2, Yusuf Decl. ¶¶ 4, 6, Ex. 4; ECF No, 8-2, Kangnigan Decl. ¶ 4, Ex. 6; ECF No,

8-2, Holmes Decl. ¶¶ 5, 7, Ex. 7; ECF No, 8-2, Quevedo Decl. ¶ 11, Ex. 8; ECF No, 8-2,

Zuniga Decl. ¶ 4, Ex. 9.) Third, Defendant improperly deducts lunch breaks from


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Plaintiffs’ compensation that are never taken or that are interrupted. (ECF No, 8-2,

Hussein Decl. ¶ 5, Ex. 2; ECF No, 8-2, Issa Decl. ¶ 5, Ex. 3; ECF No, 8-2, Kangnigan

Decl. ¶ 5, Ex. 6; ECF No, 8-2, Holmes Decl. ¶ 8, Ex. 7.) See Minn. R. 5200.0120, subp. 4

(stating that employer can only deduct “bona fide meal periods” from hours worked, and

that employees must be paid for meal periods that are interrupted by calls to duty).

Defendant argues, however, that the evidence overwhelmingly disproves

Plaintiffs’ allegation that Capital fails to maintain accurate timekeeping records. Instead,

it shows that Capital maintains detailed, down-to-the-minute timekeeping records based

on the employees’ own activities of clocking-in or out. The records show the hours

worked each day and each workweek by the employee. In addition, Capital has records

concerning the name, address, and occupation of each employee, as well as payroll

records showing the rate of pay and the amount paid to each employee for each pay

period. (K.Z. Decl., Exs. 15, 16, 17, 19, 20, 21, 22, 23.)

Moreover, Defendant argues that it has procedures in place to address those

limited instances in which an employee’s work hours are not recorded, such as when an

employee forgets to clock-in or clock-out. Several of the Plaintiffs have taken advantage

of this “Administrative Pay Corrections” policy on multiple occasions, including Melvin

Holmes, Naima Issa, and Leticia Escamilla. When these employees reported inaccuracies

in their work hours, Capital promptly investigated their claims and issued retroactive

payment to them. (K.Z. Decl. ¶ 7.) And to the extent that Plaintiffs have alleged a handful

of additional incidents in which they questioned the accuracy of their pay, those kinds of

isolated errors are likely to occur in any business.


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Finally, Defendant alleges Capital’s meal break policy is completely legal.

Capital’s policy directs employees to take a thirty-minute lunch break whenever they

work a shift of seven hours or longer. (K.Z. Decl., Ex. 1.) Consistent with this policy,

Capital automatically deducts meal-break time from shifts of seven hours or more unless

the employee notifies Capital that he or she worked during the lunch break. (Id.) Each of

the Plaintiffs signed acknowledgements agreeing that they understood this policy. (K.Z.

Decl., Ex. 4.) Automatic meal-break deduction policies like the one maintained by

Capital are lawful, and numerous cases have held that “if an employer establishes a

reasonable process for an employee to report uncompensated work time the employer is

not liable for non-payment if the employee fails to follow the established process.” White

v. Baptist Mem. Health Care Corp., 699 F.3d 869, 876 (6th Cir. 2012).

4. Plaintiff’s Allegations Regarding Wage Payment Methods

Plaintiffs also allege that Defendant’s method of paying wages violates Minnesota

law. Minn. Stat. § 177.23, subd. 4 states that wages must be made payable by: (1) cash;

(2) check; (3) direct deposit; or (4) payroll card. Employers may not use direct deposit if

the employee objects in writing. Minn. Stat. § 177.23, subd. 4(3). Similarly, an employer

may only use payroll cards if the employee consents in writing to that method of

payment. Minn. Stat. § 177.255, subd. 6. Read together, these statutes require an

employer to pay an employee with either cash or check if the employee declines to be

paid by direct deposit or payroll card. Employers who pay their employees by electronic

transfer to payroll cards must permit each employee to withdraw the employee’s entire


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net pay in one free transaction on or after the employee’s regular payday. Minn. Stat.

§ 177.255, subd. 4.

Plaintiffs’ allege Capital’s pay practices violate these statutes in at least two ways.

First, employees are only given two options: direct deposit or payroll cards. (ECF No, 8-

2, Quevedo Decl. ¶ 12, Ex. 8.) Second, Capital does not permit employees to withdraw

their entire net pay in a free transaction on and after the employee’s regular pay day.

(ECF No, 8-2, Deshler Decl. ¶ 6, Ex. 5; ECF No, 8-2, Quevedo Decl. ¶ 12, Ex. 8.)

Instead, Plaintiffs end up paying ATM fees to access their own wages. (Id.)

Defendants contend that these assertions are without merit. Minnesota law permits

employers to pay wages to employees using either direct deposit or electronic fund

transfers to a payroll card account. Minn. Stat. § 177.23, subd. 4(3-4). Each of the

Plaintiffs consented in writing to receive their wages from Capital either by direct deposit

or payroll card account. (K.Z. Decl., Ex. 10.) The only circumstances in which payment

via direct deposit or payroll card account is not permissible under Minnesota law is in

instances of “written objection to the employer by the employee” or instances in which an

employee requested to be paid in a manner other than by payroll card account. Minn.

Stat. § 177.23, subd. 4(3-4); see also Minn. Stat. § 177.255, subd. 11. None of the

Plaintiffs allege that they objected in writing to the method by which Capital pays their

wages or requested a different method of payment.

In addition, only one of the eight Plaintiffs (Ray Deshler) claims to have incurred

ATM fees due to his payroll card account, but Mr. Deshler could use his SimplyPaid

payroll card to access cash without paying any fees by: (i) visiting an AllPoint ATM; (ii)


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visiting any Bank; or (iii) requesting cash back during a PIN purchase. (K.Z. Decl. Ex.

12.) There are numerous Allpoint ATM locations throughout the Minneapolis and St.

Paul area, including at least six within 0.2 miles of Mr. Deshler’s home. (Id. Exs. 13-14.)

5. Plaintiffs’ Allegation Regarding Overtime and Minimum Wage

Plaintiffs’ allege that Defendant routinely fails to pay all overtime owed. Plaintiffs

are hourly, non-exempt employees and therefore are entitled under the FLSA to payment

at one-and-one-half times their regular rate of pay for all hours worked in excess of forty

in a workweek. 29 U.S.C. § 207(a). Several Plaintiffs have worked more than forty hours

in at least one workweek within the past three years, but based upon their net pay, were

not paid the overtime premiums to which they were entitled. (ECF No, 8-2, Hussein Decl.

¶ 6, Ex. 2; ECF No, 8-2, Issa Decl. ¶ 6, Ex. 3; ECF No, 8-2, Kangnigan Decl. ¶ 6, Ex. 6;

ECF No, 8-2, Holmes Decl. ¶¶ 7, 10, Ex. 7; ECF No, 8-2, Quevedo Decl. ¶ 14, Ex. 8;

ECF No, 8-2, Zuniga Decl. ¶ 6, Ex. 9.)

Plaintiffs also allege that Defendant routinely fails to pay the applicable minimum

wage. Beginning August 1, 2014, Minnesota law required employers to pay employees at

a rate of no less than $8.00 per hour. Minn. Stat. § 177.24, subd. 1(b)(1)(i). Since July

2009, the FLSA has required employers to pay a wage of at least $7.25 per hour. 29

U.S.C. § 206(a)(1). An employee earning a gross wage of $8.00 per hour should

generally receive take home pay of $7.38 per hour net of tax withholdings. An employee

earning a gross wage of $7.25 per hour should generally receive take home pay of $6.70

per hour net of tax withholdings.


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Defendant claims to pay Plaintiffs at a rate equal to or greater than the state and

federal minimum wage. (ECF No, 8-2, Hussein Decl. ¶ 2, Ex. 2; ECF No, 8-2, Issa Decl.

¶ 2, Ex. 3; ECF No, 8-2, Yusuf Decl. ¶ 2, Ex. 4; ECF No, 8-2, Deshler Decl. ¶¶ 2, 4, Ex.

5; ECF No, 8-2, Kangnigan Decl. ¶ 2, Ex. 6; ECF No, 8-2, Holmes Decl. ¶ 3, Ex. 7; ECF

No, 8-2, Quevedo Decl. ¶ 5, Ex. 8; ECF No, 8-2, Zuniga Decl. ¶ 2, Ex. 9.) However, as a

result of Defendant’s alleged failure to pay Plaintiffs for all hours worked, based upon

their hours worked and net pay, Plaintiffs say they were paid below the minimum wage in

one or more workweeks during the past three years. (ECF No, 8-2, Hussein Decl. ¶ 4, Ex.

2; ECF No, 8-2, Issa Decl. ¶¶ 2, 4, Ex. 3; ECF No, 8-2, Yusuf Decl. ¶¶ 4–6, Ex. 4; ECF

No, 8-2, Deshler Decl. ¶¶ 4–5, Ex. 5; ECF No, 8-2, Kangnigan Decl. ¶ 4, Ex. 6; ECF No,

8-2, Holmes Decl. ¶ 9, Ex. 7; ECF No, 8-2, Quevedo Decl. ¶ 13, Ex. 8; ECF No, 8-2,

Zuniga Decl. ¶¶ 4–5, Ex. 9.) Indeed, Plaintiffs’ declarations identify as examples specific

pay periods in which their compensation fell below minimum wage levels based upon the

number of hours worked. (ECF No, 8-2, Hussein Decl. ¶ 4, Ex. 2; ECF No, 8-2, Yusuf

Decl. ¶¶ 4–6, Ex. 4; ECF No, 8-2, Kangnigan Decl. ¶ 4, Ex. 6.)

Defendants assert, however, that its timekeeping and payroll definitively disprove

the vast majority of Plaintiffs’ allegations, many of which are based on inaccurate reading

of the time records or faulty math. For example, Plaintiff Duniyo Hussein alleges that

during the pay period of June 18, 2014, to July 1, 2014, she was paid only $539.12 for

130 hours of work. (ECF 8-2, at 2-3.) This assertion is based on a misreading of an

earnings statement in which Ms. Hussein received a retroactive raise, and is plainly

untrue. (K.Z. Decl., Ex. 15.) Likewise, Assiongbonvi Kangnigan asserts that he does not


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believe he was paid overtime for several pay periods in January and February 2014. (See

ECF 8-2, at 14.) Again, Capital’s pay records decisively show that he was paid for all

overtime owed. (K.Z. Decl., Ex. 20.) And Ray Deshler asserts, without any support, that

he believes he is only paid $7.75 an hour. (ECF 8-2, at 11.) Again, Capital’s payroll

records show that Mr. Deshler’s allegation is false. (K.Z. Decl. Ex. 19.)

II. EXPLANATION OF SETTLEMENT.

A. The Parties Stipulate to Class Certification Under Fed. R. Civ. P. 23

for the Purpose of Settlement.

The Parties agree, as part of the settlement, to stipulate to Rule 23 class

certification of the MFLSA and PWA claims in this case for the purpose of notice and

settlement. Specifically, the Parties stipulate to certification under Fed. R. Civ. P.

23(b)(3) of a class defined as follows:

All individuals employed by Defendant as cleaners (including crew leads)

in Minnesota from May 20, 2012, through January 15, 2016.

The legal basis for certification is set forth below.

B. Allocation and Distribution of Settlement Funds.

The Parties agree to settle all claims in this case for $425,000 (hereinafter referred

to as “Settlement Payment”). (See Hansen Decl, Ex. 1, ¶II(B)) The settlement

contemplates an award of attorneys’ fees of one-third, or $141,666.66, an award of

litigation costs (including settlement administration costs) capped at $10,000, incentive

awards totaling $25,000, and individual awards for certain named Plaintiffs totaling

$33,000. (See Hansen Decl. Ex. 1.)


18

After accounting for attorneys’ fees, costs, individual awards, and incentive

payments, the remaining portion of the Settlement Payment, which totals $215,333.34,

shall be distributed among the Settlement Class according to a formula devised by Class

Counsel, which shall primarily be based on (1) the weeks worked by each member of the

Settlement Class, and (2) the compensation earned by each member of the Settlement

Class. (See Hansen Decl. Ex. 1 ¶II(D)(9).) Each member of the Settlement Class will

receive a minimum payment from the Settlement in the amount of $100.00. (See Hansen

Decl. Ex. 1 ¶II(D)(9).)

The individual settlement payments to Participating Class Members will be

allocated in the following manner: (1) fifty percent (50%) of the total payment to each

Participating Class Member shall be allocated to wage claims and will be reported to

taxing authorities on Forms W-2; (2) fifty percent (50%) of the total payment to each

Participating Class Member will be allocated to all non-wage claims, including liquidated

damages, interest and other applicable penalties payable to the Participating Class

Member under federal and state law and will be reported to taxing authorities on Form

1099. (See Hansen Decl. Ex. 1¶II(D)(13)(i)(a).) Defendant will be responsible for

calculating and paying the employer’s share of payroll taxes on all settlement amounts

subject to payroll taxation. (Id.) Such employer payroll tax payments will not be

deducted from the settlement fund. (Id.)

The settlement employs a “claims made” claims process. Under this procedure,

class members must submit a claim form in order to participate in the settlement. (See

Hansen Decl. Ex. 1 ¶II(D)(6).) Consistent with Rule 23(c), all class members who wish


19

to exclude themselves may do so. (See Hansen Decl. Ex. 1 ¶II(D)(7).) Those who exclude

themselves will not have their legal rights affected in any way. (See Hansen Decl. Ex. 1.)

However, class members who fail to respond will have their share of the settlement re-

allocated to participating class members on a pro rata basis. (See Hansen Decl. Ex. 1

¶II(D)(9).) Under this procedure, there is no possible reversion of funds to Defendant nor

any possible change in the funds allocated to Plaintiffs’ counsel—both in absolute terms

and relative to the amount going to the class members. (See Hansen Decl. Ex. 1 ¶II(D).)

The scope of the release in this case is precisely tailored to the claims raised in the

Complaint. Class members who participate in the settlement will release only the class

claims asserted in the Complaint. (See Hansen Decl. Ex. 1 ¶II(C).) Further, the release is

limited in temporal scope. The release will not affect any claims that accrued (or will

accrue) on or after January 16, 2016. (See Hansen Decl. Ex. 1 ¶II(C).) Class members

who fail to respond in a timely manner to the proposed notice will release only the state

law MFLSA and PWA claims alleged in the Complaint; class members who fail to

respond will not release any federal claims, including the FLSA claims raised in this case.

(See Hansen Decl. Ex. 1 ¶II(C).) Five of the named Plaintiffs who are receiving

individual awards related to individualized grievances will execute a general release

against Capital. (See Hansen Decl. Ex. 1 ¶ II(C).)

The parties have agreed upon a procedure to ensure that the class notice reaches as

many class members as possible. Capital has provided the names, addresses, and last four

digits of the social security number for all class members. (Hansen Decl. ¶ 17.) Plaintiffs’

counsel will utilize several public and private tools, including the U.S. Post Office’s


20

National Change of Address database, LexisNexis’s Accurint database, and Thompson

West’s People Finder database, to ensure that the class notice is directed to the correct

addresses. (See Hansen Decl. Ex. 1 ¶II(D)(4).) As with Plaintiffs’ proposed conditional

certification notice that this Court adopted, Plaintiffs’ counsel will send out the class

notice in English, Spanish, and Somali. Plaintiffs’ counsel will maintain its case website,

http://www.nka.com/case/capital-building-services-group-inc/, and continue to direct

class members to contact Plaintiffs’ counsel if they have any questions about the

settlement or the case itself. (See Hansen Decl. Ex. 1 ¶II(D)(3).)

The settlement contemplates a great measure of forward looking injunctive relief.

Under the terms of the settlement, Defendant is obligated to provide employees with

paper paystubs for a period of one year, and then follow Minnesota law (including the

provisions governing workplace access to electronic wage statements) thereafter. (See

Hansen Decl. Ex. 1 ¶II(E)(2).) Defendant is obligated to draft a compliant pay card

disclosure form, and Defendant shall not commence paying employees with pay cards

until employees have signed the consent form. (See Hansen Decl. Ex. 1 ¶II(E)(1).)

Defendant is obligated to designate a corporate representative to receive and address

wage complaints prospectively. (See Hansen Decl. Ex. 1 ¶II(E)(3).) Defendant is

obligated to develop a form for employees to report employer-required time traveling

between stores on a prospective basis and pay employees for the travel time if required

by applicable law. (See Hansen Decl. Ex. 1 ¶II(E)(4).) Defendant is obligated to provide

all employees with the option to be paid via paper check. (See Hansen Decl. Ex. 1

¶II(E)(5).) Defendant is obligated generally to comply with all state and federal labor


21

laws. (See Hansen Decl. Ex. 1 ¶II(E)(8).) Finally, the settlement requires Defendant to

submit to the Court a signed declaration stating that Defendant has complied with all

injunctive relief contemplated by the settlement agreement within 60 days of the

settlement effective date. (See Hansen Decl. Ex. 1 ¶ II(E)(7)).

The Settlement agreement does not contain any confidentiality, nondisclosure, or

clawback provisions. (See Hansen Decl. Ex. 1.) All provisions in the agreement will

stand in the public record, and class members will not be barred from speaking about

their employment experiences.

Because the agreement contemplates a claims-made procedure, the parties

anticipate that the vast majority of the allocated funds will be directed to participating

class members. However, any portion of the Settlement Payment not negotiated by any

member of the Settlement Class within 90 days of being mailed shall be null and void and

shall be paid as a cy pres award to the Mid-Minnesota Legal Aid. (See Hansen Decl. Ex 1

¶II(B)(3).) The cy pres payment, if any, will be made by the parties no later than 220 days

after the Settlement Effective Date. (Id.)

C. The Parties Stipulate to Distribution of Notice of Proposed Class

Settlement.

The Parties have drafted a Class Notice which will be distributed by Plaintiffs,

through the law firm of Nichols Kaster, PLLP and its attorneys, who through the instant

Motion request to be appointed Class Counsel and Settlement Administrator in this case.

(Hansen Decl. ¶18; see also Ex. 1) Class Notice will be distributed via First Class,

regular United States Mail using the most current mailing address information available


22

from Capital’s and Plaintiffs’ counsel’s records. (See Hansen Decl. Ex. 1 ¶ II(D)(3))

Defendant will cooperate with Plaintiffs’ counsel in providing information from

Defendant’s records for purposes of mailing the Class Notice. (See Hansen Decl. Ex. 1 ¶

II(D)(1).)

The Class Notice will inform all Class Members that, if they wish to participate in

the settlement, they must fill out and sign the settlement participation form included with

the notice. (See Hansen Decl. Ex. 1.) The Class Notice will further explain that by

signing the form, they will release Defendant from all claims based upon any of the

matters brought in this litigation and receive settlement benefits. (Id.)

The Class Notice will inform all Class Members that, unless they send Plaintiffs’

counsel a signed request for exclusion post-marked within forty-five (45) days from the

mailing of the Class Notice, they will release Defendant from all state law claims based

upon any of the matters brought in this litigation and receive settlement benefits. (Id.)

The Class Notice will explain that if the individual would like to be excluded from

the Class, he or she must send Plaintiffs’ counsel a written request and must: (1) provide

their name, the dates and locations where they worked for Capital, and (2) sign a

statement indicating “I understand I am requesting to be excluded from the Parties’

settlement and that I will receive no money from the Parties’ settlement. I understand that

if I am excluded from the Parties’ settlement, I may bring a separate legal action seeking

damages, but might recover nothing, or less than what I would have recovered if I had

remained in the Parties’ settlement in this case” (the “Opt-Out Notice”). (Id.) Each Opt-

Out Notice must be timely sent to Class Counsel, with a copy to the Defendant’s counsel.


23

(Id.) The Class Notice explains that a Class Member who asks to be excluded cannot

object to the settlement and cannot receive payment under the settlement, but also will

not be legally bound by anything that happens in this litigation and may sue Defendant in

the future about the claims in this litigation. (Id.)

The Class Notice will also inform all Class Members that even if they do not

exclude themselves from the Class, they have forty-five (45) days to send Plaintiffs’

Counsel an objection explaining why they disagree with the settlement. (Id.) The Class

Notice also explains that Class Members who, within the forty-five day timeframe, mail

Plaintiffs’ Counsel a written notice of their intent to appear, may also speak to the Court

about the settlement at the Final Fairness Hearing. (Id.)1

ARGUMENT

Federal courts favor the voluntary resolution of litigation through settlement,

particularly in the class action context. See White, et al. v. Nat’l Football League, et al.,

822 F. Supp. 1389, 1417 (D. Minn. 1993) (citing Armstrong v. Board of Sch. Directors,

616 F.2d 305, 312-13 (7th Cir. 1980)); Holden v. Burlington Northern Inc., 665 F. Supp.

1398, 1405 (D. Minn. 1987). The Eighth Circuit Court of Appeals has held “strong public

policy favors [settlement] agreements, and courts should approach them with a

presumption in their favor.” Petrovic v. Amoco Oil Co., 200 F.3d 1140, 1148 (8th Cir.

1999) (citing Little Rock Sch. Dist. v. Pulaski Cty. Spec. Sch. Dist. No. 1, 921 F.2d 1371,

1383 (8th Cir. 1990)). It is the “surety of settlement” that makes it a favored policy for

1Plaintiffs’ Counsel shall provide the Court and Defendant with all exclusions requests,

notices to appear, and objections prior to the Final Fairness Hearing.


24

dispute resolution as compared to the “unknown dangers and unforeseen hazards of

litigation.” See In re Charter Comm’n, Inc., No. 4:02-CV-1186 CAS, 2005 U.S. Dist.

LEXIS 14772 at *16, 2005 WL 4045741 at *4 (E.D. Mo. June 30, 2005) (internal

citations omitted). For the reasons set forth below, the Court should (1) certify the

proposed class for purposes of settlement, appointing Plaintiffs’ Counsel as Class

Counsel and Settlement Administrator and the Named Plaintiffs as Class Representatives;

(2) preliminarily approve the Parties’ proposed settlement; and (3) approve the Class

Notice for distribution, setting a date for the Final Fairness Hearing.

I. CERTIFICATION OF PLAINTIFFS’ CLAIMS UNDER FED. R. CIV. P. 23

IS APPROPRIATE.

As a preliminary matter, the Parties request the Court certify this action as a class

action pursuant to Fed. R. Civ. P. 23 for purposes of settlement. As stated above, the

proposed Class includes:

All individuals employed by Defendant as cleaners (including crew leads)

in Minnesota from May 20, 2012, through January 15, 2016.

For purposes of this settlement only, Defendant consents to certification of the Class

under Fed. R. Civ. P. 23(a)(1-4) and 23(b)(3). As discussed in detail below, class

certification is appropriate because the four prerequisites under Fed. R. Civ. P. 23(a)

necessary to determine class certification are met: (1) numerosity; (2) commonality; (3)

typicality; and (4) adequacy of representation, as well as the predominance requirement

of Fed. R. Civ. P. 23(b)(3).2

2Rules 23(a) and 23(b) apply equally in determining class certification for settlement

purposes except the judge need not determine “whether a case, if tried, would present


25

A. The Prerequisites of Rule 23(a) Are Met.

1. The Proposed Class Meets the Numerosity Requirement.

Fed. R. Civ. P. 23(a)(1) requires a proposed class be “so numerous that joinder of

all members is impracticable.” “No arbitrary or rigid rules regarding the required size of

a class have been established by the courts, and what constitutes impracticability depends

on the facts of each case.” Cooper v. Miller Johnson Steichen Kinnard, Inc., No. Civ. 02-

1236(RHK/AJB), 2003 U.S. Dist. LEXIS 6946 at *6, 2003 WL 1955169 at *2 (D. Minn.

April 21, 2003) (internal citations omitted); see also Gen Tel. Co. of the Nw., Inc. v.

EEOC, 446 U.S. 318, 330 (1980) (stating that when analyzing the numerosity

requirement, “examination of the specific facts of each case [is required] and imposes no

absolute limitations” on size). When analyzing whether Rule 23(a)(1) has been met,

courts consider the type of action, the size of individual claims, inconvenience of trying

individual claims and other relevant factors to show the practicability of joining all class

members. See Paxton v. Union Nat’l Bank, 688 F.2d 552, 559-60 (8th Cir. 1982).

Notably, the burden is not to show joinder is impossible. In re Charter Communications,

Inc., No. 4:02-CV-1186 CAS, 2005 U.S. Dist. LEXIS at *36, 2005 WL 4045741 at *11

(E.D. Mo. June 30, 2005) (internal citations omitted).

This District has held that a class of forty individuals “should raise a presumption

that joinder is impracticable” and “should meet the test of Rule 23(a)(1).” Lockwood

Motors v. Gen. Motors Corp., 162 F.R.D. 569, 574 (D. Minn. 1995) (internal citations

intractable management problems.” Amchem Products, Inc. v. Windsor, 521 U.S. 591,

620 (1997); MANUAL FOR COMPLEX LITIGATION, Section 21.132 (4th Ed. 2004).


26

omitted). Capital’s records identified 650 individuals who met the class definition.

(Hansen Decl. ¶ 19.) Thus, the requirements for Fed. R. Civ. P. 23(a)(1) are met in this

case.

2. The Class Shares Common Questions of Law and Fact.

Fed. R. Civ. P. 23(a)(2) requires the parties to show there is a question of law or

fact common to the class.

While not every question of law or fact must be common to the entire class,

the Plaintiffs must show that the course of action giving rise to their cause

of action affects all putative class members, or that at least one of the

elements of that cause of action is shared by all of the putative class

members.

See Cooper, 2003 U.S. Dist. LEXIS 6946 at *8 (internal citations omitted). Common

questions about the defendant’s liability are appropriate for class-wide treatment even

when the damages among the class members might be different. See In re Select Comfort

Corp. Sec. Litig., 202 F.R.D. 598, 603 (D. Minn. 2001).

Here, the commonality requirement is met because the proposed Class Members’

claims all derive from the same common theories: that Plaintiffs were systematically

denied minimum wage, gap time, and overtime pay through a series of common methods.

(See supra pp. 4-9.) Moreover, Plaintiffs have alleged that class members—as a group—

did not receive pay stubs and were denied the chance to provide authorization to be paid

by pay card. To maintain a wage-and-hour case as a class action, “[s]howing a ‘unified

policy’ of violations is not required.” O’Brien v. Ed Donnelly Enters., Inc., 575 F.3d 567,

584 (6th Cir. 2009). Rather, “where the employer’s records are inaccurate or inadequate,”

employees may “show the amount and extent of [their] work as a matter of just and


27

reasonable inference.” Id. at 779 (citing Anderson v. Mt. Clemens Pottery Co., 328 U.S.

680, 688 (1946)). Nevertheless, several common questions of law and fact are common to

the class:

a. whether Defendant paid class members proper minimum wage, gap

time, and overtime compensation;

b. whether Defendant maintained accurate records that are necessary

and appropriate to enforce Minn. Stat. §§ 177.21 to 177.35;

c. whether Defendant complied with Minnesota law regarding

providing wage statements;

d. whether Defendant failed to obtain authorization prior to requiring

employees to use payroll cards, and whether Defendant used payroll

cards to make improper deductions, in violation of Minn. Stat.

§§ 177.255, subd. 5 and 6;

e. whether Defendant provided rest and meal breaks as required by the

MFLSA; and

f. The proper measure of damages sustained by the Rule 23 Class.

These common questions of law and fact apply and must be answered for each and every

Class Member and, therefore, demonstrate that the commonality requirement under Rule

23(a)(2) is met in this case.

3. The Plaintiffs’ Claims are Typical of the Class Claims.

Rule 23(a)(3) requires “the claims or defenses of the representative parties are

typical of the claims or defenses of the class.” The typicality requirement presumes the

members of the class have claims or defenses typical to the representative parties. In

other words, the representative parties’ claims have the “same or similar grievances” to

the class. See Cooper, 2003 U.S. Dist. LEXIS at *7-8. “Typicality is satisfied when the

claims of the named plaintiffs emanate from the same event or are based on the same


28

legal theory as the claims of the class members.” Lockwood Motors, 162 F.R.D. at 575.

Courts liberally apply the typicality requirement when the representative claims come

from the same event or based on the same legal theory as the class members’ claims. See

Alpern v. UtiliCorp. United, Inc., 84 F.3d 1525, 1540 (8th Cir. 1996). Slight factual

differences are allowed so long as the claims arise from the same event.

Here, Named Plaintiffs’ claims are typical to the Class Members’ in that they were

or are all cleaners employed by Capital and working at Macy’s or Herberger’s stores and

were subject to the same unlawful practices described in the Complaint. If these

practices should be found lawful or unlawful, the Named Plaintiffs’ claims will be

affected in the exact same way as those of the other Class Members. Thus, here, the

typicality requirement under Rule 23(a)(3) is met.

4. The Class Representatives Are Adequate.

Fed. R. Civ. P. 23(a)(4) requires Plaintiffs show that “the representative parties

will fairly and adequately protect the interests of the class.” Courts find the adequacy

requirement is met when: “(1) the representatives and their attorneys are able and willing

to prosecute the action competently and vigorously and (2) each representative’s interests

are sufficiently similar to those of the class that it is unlikely that their goals and

viewpoints will diverge.” See In re Potash Antitrust Litig., 159 F.R.D. 682, 692 (D.

Minn. 1995). Moreover, class counsel must be “qualified, competent and diligent.” In re

Acceptance Ins. Cos. Secs.Litig., No. 8:99-CV-00547, 2001 U.S. Dist. Lexis. 25829 (D.

Neb. Aug. 6, 2001) (citing Bishop v. Committee Prof. Ethics, 686 F.2d 1278, 1288 (8th

Cir. 1982). Here, the adequacy requirements are met by the Named Plaintiffs, who seek


29

to be appointed Class Representatives, and Plaintiffs’ Counsel, who seek to be appointed

Class Counsel.

First, the Named Plaintiffs are current and former cleaners who work or worked

for Capital. Moreover, each of the Named Plaintiffs has diligently participated in this

case—including undergoing detailed interviews, producing documents, and participating

in a lengthy mediation process—and has assisted his or her attorneys in the drafting of

the Complaint and prosecution of this litigation. (Hansen Decl. ¶ 20.) Further, the

Named Plaintiffs have no known conflicts of interest that would compromise their

representation of the class in their best interest. (Hansen Decl. ¶ 21.)

Second, Plaintiffs’ Counsel is a qualified firm with extensive experience in class

action and wage and hour litigation. Nichols Kaster, PLLP (“Nichols Kaster”) started in

1974, and presently employs twenty-six attorneys, as well as twelve additional staff and

contract attorneys, and has been representing employees almost exclusively for 16 years.

(Hansen Decl., ¶ 22.) A large portion of Nichols Kaster’s practice is concentrated on

representing employees in wage-and-hour class and collective actions. (Id.)The firm is

currently lead or co-counsel in approximately 84 class or collective actions in state and

federal courts across the country. (Id. ¶ 23.)

Paul Lukas is a partner with Nichols Kaster and an experienced employment

litigator who has been practicing law for twenty-one years. (Id. ¶ 24.) Mr. Lukas has

authored numerous articles, participated in numerous legal seminars and conventions on

employment and trial practice issues, and is a frequent lecturer on current employment


30

related topics. (Id.) Adam Hansen is an Associate at Nichols Kaster. (Id. ¶ 25.) After

graduating from the University of Minnesota Law School, Mr. Hansen clerked for the

Minnesota Supreme Court and the United States Court of Appeals for the Eighth Circuit.

(Id.) Mr. Hansen joined Nichols Kaster in 2011, and since then his practice has focused

almost exclusively on the representation of employees in high-impact individual and

class litigation. (Id.) Carl Engstrom is an associate at Nichols Kaster. (Id. ¶ 26.) Mr.

Engstrom’s practice is focused exclusively on class-action litigation devoted to protecting

workers’ lost wages and benefits. (Id.)

For these reasons, the adequacy requirement is met under Fed. R. Civ. P. 23(a)(4).

B. The Prerequisites of Rule 23(b)(3) Are Met.

In addition to satisfying the requirements of Fed. R. Civ. P. 23(a), Plaintiffs must

establish that one of the subsections of Fed. R. Civ. P. 23(b) are also met. Here, the

proposed Class satisfies the requirements of Fed. R. Civ. P. 23(b)(3) which requires: (1)

questions of law or fact common to the class members “predominate” over questions

affecting individual class members; and (2) a showing the class action is a superior

method of adjudication for the “fair and efficient adjudication of the controversy.” See

Lockwood, 162 F.R.D. at 580. The “predominance” factor exists when there is

“generalized evidence which proves or disproves an element on a simultaneous, class-

wide basis, since such proof obviates the need to examine each class member’s individual

position.” Lockwood, 162 F.R.D. at 580 (citing In re Workers’ Compensation, 130

F.R.D. at 108). The common questions need only “predominate”; they do not need to be

dispositive of the litigation. Id. (internal citations omitted). “The fundamental question


31

is whether the group aspiring to class status is seeking to remedy a common legal

grievance.” Id. (internal citations omitted).

Here, common issues bind the proposed Class – Plaintiffs assert Defendant used a

series of common methods to underpay wages in violation of the MNFLSA. Further,

Plaintiffs allege a series of discrete statutory violations, including failure to provide wage

statements and failure to secure authorization prior to paying employees via pay card.

These issues common to the class predominate over any individual issues, satisfying the

Rule 23(b)(3) standard. And because this Court need not consider trial manageability

concerns, any individualized issues in the case are only further diminished.

Further, class treatment is appropriate because it is the superior method of

adjudicating these claims especially when considering the cost and time involved in

individual litigation. Paxton, 688 F.2d at 559-60. Class actions are more economically

feasible for all class members to seek remedy. See Deposit Guar. Nat’l Bank v. Roper,

445 U.S. 326, 339 (1980). In this case, it would be uneconomical and inefficient for the

class members to flood the courts, pursuing claims individually in more than 650

individual lawsuits, each resulting in a relatively small recovery. For these reasons, the

requirements of Rule 23(b) are also met, and the class should be certified for settlement

purposes.


32

II. THE COURT SHOULD GRANT PRELIMINARY APPROVAL OF THE

PROPOSED SETTLEMENT BECAUSE THE TERMS MEET THE FAIR,

REASONABLE, AND ADEQUATE REQUIREMENTS SET FORTH

UNDER FED. R. CIV. P 23(e).

Federal Rule of Civil Procedure 23(e) requires judicial approval for the

compromise of claims brought on a class basis. Fed. R. Civ. P. 23(e). “Court approval of

a class action settlement is necessary to assure the interests of absent class members, as

well as those of the named plaintiffs, have been protected.” See Holden, 665 F. Supp. at

1406 (citing Grunin v. Int’l House of Pancakes, 513 F.2d 114, 123 (8th Cir. 1975)); see

also In re Wireless Tele., 396 F.3d 922, 932 (8th Cir. 2005). In analyzing whether to

approve a class action settlement, courts review the parties’ jointly submitted proposal to

determine, preliminarily, if it is fair to the persons whose interests the court is required to

protect and to provide notice and an opportunity to be heard to those affected by

scheduling a fairness hearing. MANUAL FOR COMPLEX LITIGATION, FOURTH, § 13.14

(2004). For the reasons set forth below, the proposed settlement meets the requirements

of Fed. R. Civ. P. 23(e) and should be preliminarily approved.

A. The Proposed Settlement Was Negotiated After Arms-Length

Negotiations Between Experienced Counsel After Two Mediation

Sessions and Detailed Discovery.

In determining whether preliminary approval is appropriate, courts consider the

extent of the informed, arms-length negotiations between the parties in reaching the

settlement terms. See Holden, 665 F. Supp. at 1402. Courts have held terms of a

settlement are appropriate where the parties have engaged in extensive negotiations at an

appropriate stage in the litigation when they can intelligently evaluate the strengths and


33

weaknesses of the case and the propriety of the settlement. See e.g., In re Employee

Benefit Plans Sec. Litig., No. 3-92-708, 1993 U.S. Dist. LEXIS 21226 at *18, 1993 WL

330595 at *5 (D. Minn. June 2, 1993) (“[I]ntensive and contentious negotiations likely

result in meritorious settlements….”).

In the present case, the Parties reached the proposed settlement after conducting

adequate investigation and discovery on the merits of the claims and potential damages.

As discussed in detail above, Defendant produced detailed records, and responded to a

series of informal interrogatories prior to mediation. Plaintiffs provided detailed

declarations from the eight named Plaintiffs. Capital responded to Plaintiffs’ motions by

submitting voluminous records and testimony explaining Capital’s various defenses.

Sufficient evidence existed for the Plaintiffs to evaluate what Capital’s policies and

practices are with respect to its pay practices in Minnesota, how large the potential class

is, and how much money those potential class members earned during the class period.

See Holden, 66 F. Supp. at 1404 (approving settlement where parties engaged in

extensive written and oral discovery).

Furthermore, the Parties conducted rigorous arms-length negotiations in a

mediation session. Where, as is here, the parties are represented by experienced counsel

and no evidence of collusion or bad faith exists, the judgment of the litigants and their

counsel concerning the adequacy of the settlement is entitled deference. Petrovic, 200

F.3d at 1149; DeBoer v. Mellon Mortg.Co., 64 F.3d 1171, 1178 (8th Cir. 1995). The

arms-length negotiations conducted by counsel for both Parties, experienced


34

employment-law litigation firms, weighs in favor of preliminarily approving the

settlement.

B. The Proposed Settlement Is Fair, Reasonable and Adequate As

Required Under Fed. R. Civ. P. 23(e).

In addition to evaluating the propriety of the negotiations, courts consider four

factors in determining whether a proposed settlement is fair, reasonable and adequate:

(1) the merits of the plaintiff’s case weighed against the settlement terms; (2) the

defendant’s financial condition; (3) the complexity and expense of further litigation; and

(4) the amount of opposition to the settlement.3 Grunin v. Int’l House of Pancakes, 513

F.2d 114, 124 (8th Cir. 1975); Van Horn v. Trickey, 840 F.2d 604, 607 (8th Cir. 1988); In

re Wireless Tel. Fed. Cost Recovery Fees Litig., 396 F.3d 922, 932 (8th Cir. 2005);

Zilhaver et al. v. United Health Group, Inc., et al., 646 F. Supp. 2d 1075, 1079 (D. Minn.

2009). In the present case, these factors are all met and the Court should grant

preliminary approval of the settlement.

1. The Merits of Plaintiffs’ Case and Defendant’s Defenses Weigh

In Favor of Settlement Approval.

“The single most important factor in determining whether a settlement is fair,

reasonable and adequate is a balancing of the strength of the plaintiff’s case against the

terms of the settlement.” Zilhaver, 646 F. Supp. 2d at 1079 (quoting Van Horn, 840 F.2d

at 607); see also In re Wireless, 396 F.3d at 933. The Court must balance the risks and

3At the preliminary stage, the Court need only analyze the first three factors because,

ideally, the potential Class Members have not had an opportunity to make objections

through the class settlement process. That said, at this time, the Parties are unaware of

any opposition to this settlement. (Hansen Decl. ¶ 27.)


35

benefits of litigation against immediate recovery for the class members. Grunin, 513

F.2d at 124; Petrovic, 200 F.3d at 1150. In evaluating this factor, however, courts are

“not to reach any conclusions as to the merits…nor… substitute its opinion” for that of

class counsel or class members. In re Empl. Bens., 1993 U.S. Dist. LEXIS 21226 at *14

(citing Holden, 665 F. Supp. at 1407).

The facts alleged by Plaintiffs amount to a violation of state and federal wage and

hour laws, but Plaintiffs acknowledge that there is risk in establishing liability and

damages in this case. Although Plaintiffs believe the claims asserted in this case have

merit, Defendant believes that its case is strong and is supported by the evidence

developed to date. Based on the existing record, Plaintiffs believe they have demonstrated

that Defendant did not comply with Minnesota law governing wage statements and pay

cards. Further, Plaintiffs assert that the undisputed evidence shows that Defendant

maintained an illegal formal policy of failing to pay cleaners for time spent traveling

between stores in a single workday. Plaintiffs further believe that their evidence of off-

the-clock work is strong, but recognize that Defendant strongly disputes Plaintiffs’ off-

the-clock allegations and that recovery at trial is not assured.

Furthermore, the Parties contest the potential damages available to Plaintiffs and

their ability to prove the Class Members are entitled to those damages. Damages

available for violations of the MFLSA’s provisions include the amount of overtime

unlawfully withheld from the employee, liquidated damages (twice the amount of the

actual damages), civil penalties and attorneys’ fees. Minn. Stat. § 177.24, subd.3; Minn.

Stat. § 177.27. Employers who repeatedly and willfully violate the WPA, Minn. Stat.


36

§ 181.032, “shall be subject to a civil penalty of up to $1,000 for each violation for each

employee.” Minn. Stat. § 177.27, subds. 4, 7, 8. Civil penalties assessed under the PWA

are payable to the employee. Minn. Stat. §§ 181.101, 181.171, subd. 1. However, the

parties dispute the extent of penalties available in this case. The Parties dispute whether

punitive damages may be recovered.

Last, the injunctive relief secured by the settlement weighs in favor of approving

the settlement. Here, “the value of the injunctive relief . . . weighs strongly in favor of

approval.” In re Netflix Privacy Litigation, No. 5:11–CV–00379, 2013 WL 1120801, at

*5 (N.D. Cal. Mar. 18, 2013). The settlement here contemplates several crucial and

valuable measures of forward-looking injunctive relief. Under the terms of the settlement,

Defendant must provide employees with paper paystubs for a period of one year, and

then follow Minnesota law (including the provisions governing workplace access to

electronic wage statements) thereafter; must draft a compliant pay card disclosure form,

and must not commence paying employees with pay cards until employees have signed

the consent form; must designate a corporate representative to receive and address wage

complaints prospectively; must develop a form for employees to report employer-

required time traveling between stores on a prospective basis and pay employees for the

travel time if required by applicable law; must provide all employees with the option to

be paid via paper check; and must comply with all state and federal labor laws. These

components of relief, secured under the terms of the settlement, bring a great measure of

value to the class members, many of whom are still employed by Capital. Even from the

perspective of the many class members who no longer work for Defendant, the proposed


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settlement is “consistent with the public interest.” United States v. Jones & Laughlin

Steel Corp., 804 F.2d 348, 351 (6th Cir. 1986).

Based on the foregoing, the Parties believe the adequacy of the settlement is

reasonable when balanced against the strength of the Plaintiffs’ case and Defendant’s

defenses, paucity of controlling case law, and disputed methods of calculating damages.

2. Capital’s Financial Situation.

Courts also examine the compensation provided in the settlement and the

defendant’s ability to pay when determining whether the settlement is fair, reasonable

and adequate. See Petrovic, 200 F.3d at 1152 (citing Grunin, 513 F.2d at 124).

Here, the factor strongly supports approving the settlement. During the course of

the litigation, Defendant stated that it would likely declare bankruptcy rather than bear

the continued litigation costs and exposure to a significant adverse judgement. Plaintiffs

demanded detailed financial records to independently verify Defendant’s claims.

Defendant complied, producing detailed financial records. Based on the Plaintiff’s

counsel’s examination of the records, Plaintiffs learned that Defendant, while financially

stable, lacks sufficient funds to pay a substantial judgment. In the cleaning industry,

Defendant is a smaller company. Defendant counts only Macy’s and Herberger’s as its

clients, and only contracts to clean stores in the Midwest. Further, Defendant owed

significant money to secured creditors, indicating that Plaintiffs and class members would

likely recover little or nothing if the company filed for bankruptcy.

The factor strongly supports approval of the settlement.

3. Expense of Further Litigation Supports Settlement.


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Finally, at this preliminary stage, the Court must evaluate whether the expense and

complexity of further litigation weighs in favor of approving the settlement. Here, the

complexity of this case, together with the cost of litigation in completing class discovery,

arguing certification, further discovery if the class were certified, summary judgment and

thereafter trial, weighs in favor of approval.

If the case were certified, the discovery relating to class claims would have been

extensive – especially as it relates to damages. Furthermore, the Parties would have

engaged in further debate regarding electronic discovery, numerous depositions of

managers, employees, and potentially, clients of Capital, and expert witness debates. The

trial of this case would have likely lasted more than two weeks and the calculation of

damages, if there was a jury verdict, would have been complicated and prolonged. Under

this proposed settlement, the Class Members are guaranteed money instead of prolonged

litigation during which time the “class members would receive nothing.” See In re

Wireless, 396 F.3d at 933 (affirming settlement, in part, because” barring settlement, this

case would ‘likely drag on for years….’”) (quoting district court).

4. Plaintiffs’ Proposed Allocations for Fees, Costs, and Incentive

Awards Are Reasonable.

Prior to final approval, Plaintiffs will file a motion for fees, costs, and incentive

awards. As a preliminary matter, however, Plaintiffs’ proposed allocations are fair and

reasonable. First, Plaintiffs’ counsel anticipates seeking one-third of the total settlement

amount as attorney’s fees, or $141,666.66. (See Hansen Decl. Ex. 1 ¶II(D)(4).) Courts

typically calculate fees by one of two methods: (1) the lodestar method (i.e., multiplying


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the hours reasonably expended by a reasonable hourly rate and adjusting by a multiplier);

or (2) awarding fees as a percentage of the total settlement amount. Carlson, 2006 WL

2671105 at *7 (citing Petrovic, 200 F.3d at 1157 and Johnston v. Comerica Mortgage

Corp., 83 F.3d 241, 244 (8th Cir. 1996)). Here, either method justifies the award.

Plaintiffs’ counsel’s current lodestar exceeds $141,666.66. (Hansen Decl. ¶28) Further,

Plaintiffs’ counsel seeks $10,000 in litigation costs, including all future costs associated

with administering the settlement. At present, Plaintiffs’ counsel has expended

approximately $7,800 in litigation costs. (Hansen Decl. ¶29) Given that the total costs,

including settlement administration costs, will assuredly exceed $10,000, Plaintiffs’

request is reasonable. Finally, as a preliminary matter, the $25,000 Plaintiffs seek in

incentive compensation is reasonable. Incentive awards are fairly typical in class action

cases. See 4 William B. Rubenstein et al., Newberg on Class Actions § 11:38 (4th

ed.2008); Theodore Eisenberg & Geoffrey P. Miller, Incentive Awards to Class Action

Plaintiffs: An Empirical Study, 53 U.C.L.A. L. Rev. 1303 (2006) (finding twenty-eight

percent of settled class actions between 1993 and 2002 included an incentive award to

class representatives). Incentive awards “are intended to compensate class representatives

for work done on behalf of the class, to make up for financial or reputational risk

undertaken in bringing the action, and, sometimes, to recognize their willingness to act as

a private attorney general.” Rodriguez v. West Publishing Corp., 563 F.3d 948, 958-59

(9th Cir. 2009). Here, the modest incentive awards sought by Plaintiffs vindicate the

purpose of such awards.


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As this is the preliminary stage of settlement approval, there are no objections to

consider. Therefore, for the reasons set forth above, the parties believe the relevant

factors to be considered weigh in favor of approving settlement at this preliminary stage.

III. THE COURT SHOULD APPROVE THE PROPOSED NOTICE FOR THE

CLASS MEMBERS.

If the Proposed Rule 23 Class is certified, notice must be served on all Class

Members who are identified through “reasonable” effort in a manner that is practical

under the circumstances. Fed. R. Civ. P. 23(c)(2)(B). Fed. R. Civ. P. 23(e) directs the

Court to “direct notice in a reasonable manner to all class members who would be bound

by the proposal.” A settlement notice need only be “reasonably calculated, under all of

the circumstances, to apprise interested parties of the pendency of the settlement

proposed and to afford them an opportunity to present their objections.” See In re

BankAmerica Corp. Sec. Litigation., 210 F.R.D. 694, 707 (E.D. Mo. 2002) (citing

Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950)). Indeed,

notice must only satisfy the “broad ‘reasonableness’ standards imposed by due process.”

See Petrovic, 200 F.3d at 1153 (citing Grunin, 513 F.2d at 121). There is no requirement

that the notice provide “a complete source of information” or an exact amount of

recovery for each Class Member. Id. (citing DeBoer, 64 F.3d at 1176).

As set forth in detail above and as demonstrated in Exhibit A to the Parties’

Settlement Agreement (Hansen Decl. Ex. 1); and the Parties’ proposed Class Notice,

modeled after notices recommended by the Federal Judicial Center;4 meets the

4Notice templates available online at www.fjc.gov.


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requirements set forth in Fed. R. Civ. P. 23(e)(1) as it is “reasonable.” Specifically, the

Class Notice:

1) Informs the Class of the claims in this lawsuit;

2) Informs the Class of the settlement amount and how the Parties propose the

amounts be allocated and distributed;

3) Informs all Rule 23 Class Members of the consequences for not returning a

settlement claims form;

4) Informs all Rule 23 Class Members of the consequences for not sending a

signed exclusion request and the specific steps the individual must take if

he or she wants to be excluded from the class;

5) Explains that even if the individual does not exclude him or herself from

the Class, he or she can file an objection, the process and potential

consequences for which are described in the notice;

6) Explains the consequences for a Rule 23 Class Member who does not “opt

out” of the settlement; and

7) Provides contact information for Class Counsel both by phone and

Internet if there are questions relating to the Notice.

The proposed Class Notice and means of distribution of the Notice meets the standards

set forth in Rule 23(e). See Petrovic, 200 F.3d at 1153.

Further, a claims-made process is a reasonable method for providing fair, prompt,

and substantial relief to the class—particularly where, as here, there is no possibility of

reversion of funds to the defendant. Hamilton v. SunTrust Mortg. Inc., No. 13–60749–

CIV, 2014 U.S. Dist. LEXIS 41668, 2014 WL 1285859 (S.D. Fla. Mar. 25, 2014).


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Requiring class members to file claim forms also maximizes the relief available to class

members who opt to submit a claim. Id. A settlement’s fairness is judged by the

opportunity created for the class members, not by how many submit claims. Id. Indeed,

district courts routinely approve reasonable claims-made settlements, including those

involving lender-placed insurance where the notice provisions and the actual relief to

class members is fair and reasonable. Id.; see, e.g., Small v. Target Corp., 53 F.Supp.3d

1141, 1142 (D. Minn. 2014 (recognizing that principal disk is combining a claims-made

process with a reversion to defendant); Casey, 2014 U.S. Dist. LEXIS 118252, 2014 WL

4120599; Trombley v. Nat’l City Bank, 826 F.Supp.2d 179, 201 (D.D.C. 2011)

(approving claims-made settlement and observing that “a claims process is often used to

ensure that money is fairly distributed for valid claims”); Wahl v. Am. Sec. Ins. Co., No.

C08–00555 (N.D.Cal.) (claims-made settlement was “entered into in good faith and ...

fair, reasonable, and adequate”).

Here, the claims-made procedure ensures that the settlement funds will end up in

the hands of class members who want to participate. Unclaimed funds will be

redistributed to participating class members. Class members who do not wish to

participate can exclude themselves. The parties’ proposed notice procedure takes steps to

make sure all class members receive accurate and timely notice. And in the event a class

member does not receive notice, her FLSA claims will be preserved, as will all claims

arising from allegations not raised in the Complaint, as well as all claims accruing after

January 15, 2016.


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CONCLUSION

For the reasons set forth above, the Parties respectfully request that the Court: (1)

certify the Proposed Rule 23 Class for settlement purposes; (2) appoint Plaintiffs’

Counsel Class Counsel; (3) appoint the Named Plaintiffs Class Representatives; (4)

preliminarily approve the Parties’ settlement; (5) appoint Plaintiffs’ Counsel Settlement

Administrator; (6) approve the Class Notice for distribution; and (7) schedule a Final

Fairness Hearing for a date approximately three (3) months following the granting of this

Motion.

Dated: February 16, 2016

NICHOLS KASTER, PLLP

s/Adam W. Hansen

Paul J. Lukas (#22084x)

Adam W. Hansen (#391704)

Carl F. Engstrom (#0396298)

4600 IDS Center

80 South 8th Street

Minneapolis, MN 55402

Telephone (612) 256-3200

ATTORNEYS FOR PLAINTIFFS

BRIGGS AND MORGAN, P.A.

s/Ellen A. Brinkman

David A. Schooler (#0225782)

Ellen A. Brinkman (#0386578)

Michael C. Wilhelm (#387655)

80 South 8th Street

Minneapolis, MN 55402

Telephone: (612) 977-8400

ATTORNEYS FOR DEFENDANT


Dkt 063 Memo in Supp of Jnt Mtn for Prelim Approval

Documents

Transcript of Dkt 063 Memo in Supp of Jnt Mtn for Prelim Approval