A federal judge had sweeping praise for a million-dollar settlement, a third of which went to attorney fees, in a Fair Labor Standards Act suit that was based on an unusual and complex employment contract.
U.S. District Judge Robert D. Mariani of the Middle District of Pennsylvania approved the settlement between a class of service technicians and their employer, Benco Dental Supply, and gave class counsel more than a 50 percent increase to its lodestar billing rate.
"Plaintiffs brought a claim in a complex and little-litigated area of the law, where prospects of victory at a jury trial and on appeal remained unclear, and still managed to settle at an amount close to the limits of defendant's liability," Mariani said.
"Given the many risks of litigation — including all the imponderable twists and turns that might not become apparent until months or years into the case — this settlement represents a more than reasonable outcome for the plaintiffs," he said in Creed v. Benco Dental Supply.
Nearly 70 technicians are included in the suit, led by Douglas Creed, alleging that they were denied overtime pay under their contracts with Benco in violation of the FLSA.
The company had signed Belo agreements with its workers, under which they were paid a flat amount for 60 hours per week, regardless of the number of hours they actually worked, according to the opinion.
A Belo contract, named for the 1942 U.S. Supreme Court case Walling v. A.H. Belo, is designed to govern the compensation of employees who work irregular hours and provides an exception from some requirements of the FLSA, according to the U.S. Department of Labor.
"Because Belo agreements are rarely used, the central issue in this case — whether the agreements were correctly administered to provide for proper overtime pay — would be difficult to address and would require a significant amount of motion practice, extensive discovery, and would ultimately culminate in a jury trial," Mariani said.
"Of course, these undertakings would be both expensive and time-consuming," he said, noting, "Even after 10 months of litigation, this case only settled at the class certification stage. On a time schedule like that, it is not at all unreasonable to assume that any trial would wait years to commence."
Lawyers had already engaged in significant motion practice just to get to this point in the litigation, the judge said, explaining that the obscurity of Belo agreements would complicate and extend the litigation.
It would also add significant risk for the plaintiffs, Mariani said: "The case law on them is sparse, and is therefore unclear as to Benco's liability. By having to litigate in a legal gray area, plaintiffs would incur substantial risks, both in a jury trial and on appeal, of an unfavorable outcome."
All of the applicable Girsh factors, set out in the U.S. Court of Appeals for the Third Circuit's 1975 opinion in Girsh v. Jepson, to be considered before approving a class settlement weighed in favor of approving this one, Mariani said.
Similarly, in assessing the attorney fees, the judge found that all seven of the Third Circuit's factors laid out in 2000's Gunter v. Ridgewood Energy for weighing fee awards in common fund cases favored $333,333 for class counsel.
The settlement fund is sufficient to fairly compensate all eligible class members, Mariani said.
"But additionally, the settlement benefits even those class members who do not opt in to it," he said. "This lawsuit was a factor in pushing Benco to abandon its old Belo agreements and to compensate its employees on an hourly basis. To the extent that Belo agreements — even if properly utilized — are complex and difficult to understand, this represents a victory for all of Benco's service technicians."
The judge praised the plaintiffs' lawyer, Rowdy Meeks, who has a practice in Leawood, Kan., as being "skilled and efficient."
"He has navigated an unclear area of law to produce an award for the class that comes close to the full extent of Benco's liability and that led to the creation of better employment contracts for all of Benco's service technicians, whether they opt into the class or not," Mariani said.
Also, Meeks took on a significant risk by handling the case on a contingency-fee basis, which could have resulted in little-to-no return for him, the judge said.
Meeks had submitted a lodestar billing rate of $625 an hour for himself and $175 an hour for his paralegal, Judy Hayman, according to the opinion. He worked 311.7 hours on the case and Hayman worked 39.2 hours.
"This would amount to a total bill of $201,672.50, meaning that the settlement agreement gives counsel 1.65 times the lodestar amount," Mariani said. "However, given the nature, complexity, and potential duration of this case, the court does not believe that a 1.65 multiplier is unreasonable."
He added in a footnote that his decision here should not be taken as an endorsement of that level of legal fees.
Neither Meeks nor George Basara of Buchanan Ingersoll & Rooney in Pittsburgh, who represented Benco, could be reached for comment.
(Copies of the 17-page opinion in Creed v. Benco Dental Supply, PICS No. 13-2686, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •