United States District Court, D. Colorado
BELICE PLIEGO on her own behalf and on behalf of all others similarly situated, Plaintiff,
LOS ARCOS MEXICAN RESTAURANTS, INC., d/b/a Los Arquitos Mexican Restaurant, Los Arquitos, Los Arquitos, Inc., Los Arcos, Inc. and Los Arcos Mexican Restaurant, AMR-LONE TREE, INC., d/b/a Los Arcos Mexican Restaurant, AMR-WESTLAND, INC., JUAN LUEVANO, IGNACIO LUEVANO, RAMON LUEVANO, SANDRA LUEVANO, and LIZ LUEVANO, Defendants
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
Belice Pliego, on her own behalf and on behalf of all others
similarly situated, Plaintiff: Brandt Powers Milstein,
Milstein Law Office, Boulder, CO.
Arcos Mexican Restaurants, Inc., doing business as Los Arcos
Mexican Restaurant, doing business as Los Arquitos Mexican
Restaurant, doing business as Los Arquitos, doing business as
Los Arcos, Inc., doing business as Los Arquitos, Inc.,
AMR-Lone Tree, Inc., doing business as Los Arcos Mexican
Restaurant, AMR-Westland, Inc. Juan Luevano, Ignacio Luevano,
Ramon Luevano, Sandra Luevano, Liz Luevano, Defendants: Emily
Hobbs-Wright, Gregory Alan Eurich, Holland & Hart,
LLP-Denver, Denver, CO.
GRANTING PRELIMINARY APPROVAL OF PROPOSED CLASS ACTION
M. Tafoya, United States Magistrate Judge.
matter is before the court on the parties' " Joint
Motion for Preliminary Approval of Proposed Class Action
Settlement" [Doc. No. 70] (" Joint Mot." ).
The parties have
consented to Magistrate Judge disposition of these two
motions pursuant to 28 U.S.C. § 636(c)(1) and
D.C.COLO.LCivR 72.2. [Doc. No. 72.] Thereafter the motions
were referred to this court by District Judge Raymond P.
Moore. [Doc. No. 73.] The court has reviewed the motions, the
pleadings, the entire case file, and the applicable law and
is sufficiently advised in the premises.
17, 2014, Plaintiff filed this collective and class action
lawsuit. (Compl. [Doc. No. 1].) Plaintiff alleged that
Defendants violated the FLSA and the Colorado Minimum Wage
Order (7 CCR 1103-7) (the " MWO" ) by failing to
pay overtime premiums to current and former employees.
Plaintiff has further alleged that Defendants improperly
rounded their current and former employees' hours and
improperly charged their employees for employer-required
uniforms. The settlement Proposed resolves both FLSA claims
as an opt-in collective and the MWO claims pursuant to the
opt-out provisions under Fed.R.Civ.P. 23.
Parties stipulate to the certification of an Opt-in/Rule 23
Class consisting of " All individuals employed by
Defendants at the Westminster and Lone Tree Los Arcos
Restaurants between June 17, 2011 and July 20, 2014."
(Joint Mot. at 4.)
Settlement Agreement [Doc. No. 70-2] provides that Defendants
will make a reversionary Settlement Payment of $178,928.84
into a Settlement Fund to compensate Plaintiff and the
combined Opt-in/Rule 23 Class (collectively, the "
Class" ) for their damages and liquidated damages,
inclusive of attorney fees and costs. In addition to the
Settlement Payment, Defendants will pay settlement
administration costs, including all charges of the Settlement
Administrator as well as the costs of class notice and notice
of proposed settlement. Also in addition, Defendants will pay
the employer's portion of required withholding and
payroll taxes per the terms of the Settlement Agreement,
attached as Exhibit 2 to the Joint Motion. The Members of the
Class shall be responsible for paying their own respective
federal, state and local tax obligations.
Settlement Agreement includes a proposed settlement payment
and distribution plan. The individual settlement allocation
for each Class Member is contained in Exhibit A to the
Settlement Agreement. Payments to the Plaintiff and the
Opt-in/Rule 23 Class Members will be allocated as follows:
After payment of amounts for uniform charge violations,
one-half of each award is attributable to back wages, is
subject to payroll tax withholding and will be reported by
Defendants or the Settlement Administrator per IRS Form W-2.
The remaining one-half of each share will be attributable to
FLSA liquidated damages, and will not be subject to payroll
tax withholding and will be reported by Defendants or the
Settlement Administrator per IRS Form 1099.
Settlement Fund is reversionary. Any remaining amounts after
all submitted claims have been satisfied, Plaintiff's
damages and service award have been paid, and attorney fees
and costs deducted, shall revert to Defendants.
Settlement Agreement provides for appointment of Settlement
Services, Inc., as Settlement Administrator to administer the
settlement process under the supervision of the Parties'
counsel and the Court. The settlement process set forth in
the Settlement Agreement provides for notice to the proposed
Class and an opportunity to opt-in or opt-out of the
settlement or to object to the settlement.
Parties have agreed to the payment of a service award to
Class Representative Belice Pliego in the amount of $7,500.00
from the Settlement Fund.
counsel seeks an award of 33% of the Settlement Fund
($59,046.52), claiming this percentage to be a customary
exchange for the settlement, Plaintiff and Members of the
Opt-In/Rule 23 Class and Class Members who do not timely
opt-out of the Rule 23 Class will release Defendants from all
claims pleaded in the Action and all claims for rounding and
charge violations whether arising under state or federal law,
including the FLSA.
with the proposed settlement means that the case will become
a " hybrid" class action, with a smaller opt-in
class with respect to the FLSA claims and a larger opt-out
class with respect to the state law claims under Rule 23.
court has jurisdiction over this case under 28 U.S.C. §
1331 (federal question), 29 U.S.C. § 216(b) (Fair Labor
Standards Act), and 28 U.S.C. § 1367 (supplemental
jurisdiction). The parties have not briefed or addressed the
issue of supplemental jurisdiction, but in a decision from
this district, Judge Daniel declined to exercise supplemental
jurisdiction over a Rule 23 state law class action together
with FLSA claims. See In re American Family Mut.
Ins. Co. Overtime Pay Litigation, 638 F.Supp.2d 1290,
1298-1302 (D. Colo. 2009)(declining to exercise supplemental
jurisdiction over state law Rule 23 portion of "
hybrid" class action because doing so would " would
undermine Congress's intent to limit the number of
plaintiffs in a FLSA action" ). However, several other
courts in this district have exercised supplemental
jurisdiction over a Rule 23 state law class claim in similar
circumstances because requiring two parallel actions "
would not serve the interests of judicial economy,
convenience, and fairness."  Bass v. PJCOMN
Acquisition Corp., No. 09-cv-01614-REB-MEH, 2011 WL
2149602, *5 (D. Colo. June 1, 2011); Lozoya v. AllPhase
Landscape Constr., Inc., No. 12-CV-1048-JLK, 2015 WL
1524639, at *1 (D. Colo. Mar. 31, 2015). This court likewise
finds that the exercise of supplemental jurisdiction to
combine consideration of the FLSA collective claim and the
state law Rule 23 class claims is appropriate in this case.
Hybrid Class Action
filing of hybrid lawsuits involving both a Rule 23 class
action and a FLSA collective action is a relatively recent
trend. See Thomas A. Linthorst & Richard G.
Rosenblatt, Wage and Hour Class Actions: Courts Grapple
With Conflict Between Rule 23 and FLSA's Opt-in
Requirement, 188 N.J. L.J. 118 (April 2007). Hybrid
actions have troubled district courts across the country
because of the inherent conflict between the opt-in
requirement of FLSA collective actions and the opt-out
provisions of Rule 23(b)(3) class actions.
actions based on state wage laws are governed by Rule 23 of
the Federal Rules of Civil Procedure. Rule 23 allows one or
more class members to sue, as a representative party, on
behalf of all class members as long as certain prerequisites
are met. Fed.R.Civ.P. 23(a). If the court certifies the class
under Rule 23(b)(3), class members must be sent notice that,
among other things, informs them of the nature of the action,
their right to exclude themselves from the action, and the
binding effect of the class judgment. Any member who does not
wish to be bound by the judgment must timely exclude
themselves by affirmatively opting-out of the class.
other hand, group actions brought asserting FLSA rights are
known as collective actions and are governed by § 216(b)
of the FLSA. " Congress enacted the FLSA in 1938 with
the goal of protect[ing] all covered workers from substandard
wages and oppressive working hours." Christopher v.
SmithKline Beecham Corp., 132 S.Ct. 2156, 2162, 183
L.Ed.2d 153 (2012). The " prime purpose" in
enacting the FLSA " was to aid the unprotected,
unorganized and lowest paid of the nation's working
population; that is, those employees who lacked sufficient
bargaining power to secure for themselves a minimum
subsistence wage." Brooklyn Savings Bank v.
O'Neil, 324 U.S. 697, 707 n.18, 65 S.Ct. 895, 89
L.Ed. 1296 (1945). To help further its goals, the FLSA
provides that an employee or multiple employees may bring an
action " on behalf of
himself or themselves and other employees similarly
situated." 29 U.S.C. § 216(b).
216(b) of the FLSA states that " [n]o employee shall be
a party plaintiff to any such action unless he gives his
consent in writing to become such a party . . . ." 29
U.S.C. § 216(b). Based on this language, courts have
found that employees must affirmatively opt-in to the case in
order to be bound by a judgment in FLSA collective actions.
Employees who do not opt-in are not similarly bound by the
results of the litigation, including any settlement.
See Dolan v. Project Constr. Corp., 725
F.2d 1263, 1266 (10th Cir. 1984), abrogated on other
grounds by Hoffmann-- La Roche Inc. v.
Sperling, 493 U.S. 165, 110 S.Ct. 482, 107 L.Ed.2d 480
the more significant effects of using either an opt-in or
opt-out scheme is the resulting class size. "
Historically, the FLSA's opt-in mechanism has limited the
size of the FLSA action, with estimates indicating that
typically only between fifteen and thirty percent of
potential plaintiff-employees opt-in." Rachel K.
Alexander, Federal Tails and State Puppy Dogs: Preempting
Parallel State Wage Claims to Preserve the Integrity of
Federal Group Wage Actions, 58 Am. U. L.Rev. 515
(February 2009). The most probable explanation for the low
response rate is the idea that " the notice received in
the mail is just another piece of junk that the recipient has
neither the time nor the interest to read, let alone act
on." Ellis v. Edward D. Jones & Co., 527
F.Supp.2d 439, 444 (W.D. Pa.2007) (citing Noah H. Finkel,
Symposium, The Fair Labor Standards Act, State
Wage--and--Hour Law Class Actions: The Real Wave of "
FLSA" Litigation?, 7 Emp. Rts. & Emp. Pol'y J.
159, 161, 174 (2003) ). See Kuncl, 660
F.Supp.2d at 1251. This theory behind low opt-in rates in
collective actions is also the most likely explanation for
the low opt-out rates in Rule 23 class actions. Id.
at 445. Because of these low opt-in and opt-out rates, Rule
23 classes are generally " much larger than the
corresponding § 216(b) collective action groups"
and the large group is bound by the ultimate judgment if they
don't opt-out. Id. By filing a hybrid action,
plaintiffs, or more aptly their attorneys, are attempting to
bring large class/collective actions in federal court by
using the Rule 23 opt-out procedure to avoid the opt-in
requirement that would be applicable to a pure FLSA
collective action. Employers are sometimes the beneficiaries
of this tactic because of the binding nature of the class
result on future individual litigation. Having the Rule 23
opt-out provisions as part of a settlement will often result
in increased attorney's fees for the class attorney,
because, just as in this case, the lawyer can be compensated
on the percentage basis of the totality of the damages of all
the affected workers, not just those who actively join the
case and receive their benefit.
number of district courts in California, in cases where some
or all of a fund set aside to pay FLSA claims regarding
earned wages will go back to an employer, have been
considering whether it would be contrary to § 216(b) to
bind putative collective members to a release of FLSA claims
by virtue of their failure to opt-out of the Rule 23 class
action where the members have not affirmatively elected to
participate in the lawsuit by filing a written consent form.
See e.g. Millan v. Cascade Water Servs.,
Inc., 310 F.R.D. 593, 612 (E.D.Cal. 2015) (where "
a statute's objectives include deterrence, as does the
FLSA's, 'it would contradict these goals to permit
the defendant to retain unclaimed funds.'" ).
See also Khanna v. Inter-- Con Sec.
Sys. Inc., No. CIV S-09-2214 KJM GGH, 2012 WL 4465558,
at *11 (E.D.Cal. Sept. 25, 2012) (quoting, inter
alia, Six (6) Mexican Workers v. Arizona
Citrus Growers, 904 F.2d 1301, 1308 (9th Cir. 1990));
La Parne v. Monex Deposit Co., No. SACV 08-0302 DOC
(MLGx), 2010 WL 4916606, at *4 (C.D.Cal. Nov. 29, 2010)
(" Relatively low interest in settlement does not mean
that [a] [d]efendant should receive a windfall benefit as a
result of absent class members failing to submit claims"
in light of the deterrent goals of the FLSA.) In these cases,
as in the case at bar, the Settlement Agreement does not
separate the settlement fund based on claims; it simply
proposes to distribute payments with respect to all of the
claims based on hours worked by the class members. This line
of cases, of course, is not binding on this court.
courts across the country have reached differing conclusions
as to whether a Rule 23 state law wage claim may proceed in
the same action as an FLSA collective wage claim, the most
recent cases arising in this District tend toward approving
such arrangements. Bass, 2011 WL 2149602 at *5;
Lozoya v. AllPhase Landscape Constr., Inc., No:
12-cv-1048-JLK, 2015 WL 1524639, *1 (D. Colo. Mar. 31, 2015).
But see In re American Family Mut. Ins. Co.
Overtime Pay Litigation, 638 F.Supp.2d at 1298-1302.
This case is at the settlement stage and both sides have
agreed to treat the settlement as a hybrid action. The
putative Class Members are identical for the FLSA claims and
the state MWO claims. The putative Class Members in this case
are low wage employees of a restaurant, many of whom are not
United States citizens. Without the vehicle of class notice,
most would never know of the alleged wage violations and
would have never brought overtime issues to the attention of
the employer. With ample current precedent to support
proceeding with a hybrid class action, the court will allow
such a settlement class here.
review and approval of a class action settlement is
undertaken in three steps: (1) preliminary approval of the
proposed settlement after submission of a written motion for
preliminary approval, the proposed class settlement, and the
proposed class notice; (2) dissemination of mailed and/or
published notice of the settlement to all affected settlement
class members; and (3) a formal fairness hearing or final
settlement approval hearing, at which time class members may
be heard regarding the settlement, and at which time evidence
and argument concerning ...