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Myers v. Medquist

March 31, 2009

DOROTHY D. MYERS ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS,
v.
MEDQUIST, INC. ET AL., DEFENDANTS.



The opinion of the court was delivered by: Simandle, District Judge

HON. JEROME B. SIMANDLE

OPINION

I. INTRODUCTION

Presently before the Court is Plaintiffs' unopposed motion for class certification, final approval of the class action settlement, and for reimbursement of attorneys' expenses [Docket Item 291]. At the heart of this lawsuit are the allegations that Plaintiffs -- medical transcriptionists who worked for MedQuist either as employees or independent contractors between November 29, 1998 and August 11, 2008 -- were systematically underpaid as a result of MedQuist's alleged undercounting of the lines its transcriptionists transcribed. After years of litigation, during which Plaintiffs' counsel engaged in extensive discovery and motion practice, Plaintiffs were unable to produce evidence that MedQuist engaged in any of the undercounting practices they alleged. After these difficulties became apparent to Plaintiffs' counsel, the parties engaged in months of arm's-length settlement negotiations, the product of which was the proposed class settlement presently under consideration.

As the discussion herein makes clear, the Court finds, based upon Plaintiffs' submissions and the evidence and argument presented at a Final Settlement Hearing convened on March 27, 2009, that this settlement represents a good value to the class for what has proved to be a very weak case. For the reasons explained below, the Court will grant Plaintiffs' motion for class certification; grant the motion for final settlement approval, finding that the settlement is "fair, reasonable, and adequate," Fed. R. Civ. P. 23(e); and grant Plaintiffs' motion for the reimbursement of attorneys' actual expenses, there being no attorneys' fees sought.

II. BACKGROUND

A. Plaintiffs' Allegations

This case is a consolidation of three putative class actions. Myers v. MedQuist was the action originally filed in this Court, which asserted jurisdiction pursuant to the Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1332(d)(2)(A). The two cases that were filed in other districts -- Hoffman v. MedQuist, No. 04-3452 (N.D. Ga.) and Force v. MedQuist, No. 05-2608 (N.D. Ga.) -- were transferred to this Court and have been consolidated with the Myers action. On January 31, 2006, Plaintiffs filed a consolidated Amended Complaint ("CAC") [Docket Item 11] under the Myers Docket.

The individually named Plaintiffs are current MedQuist medical transcriptionists and individuals who worked as medical transcriptionists for MedQuist either as employees or independent contractors from at least November 29, 1998 through July 30, 2004. (CAC ¶ 1.) MedQuist is the largest provider of medical transcription services in the United States. (Id. at ¶ 12.) MedQuist Transcriptions, Ltd. ("Transcriptions") is a wholly-owned subsidiary of MedQuist, Inc. ("MedQuist, Inc.") (Id. at ¶ 11.)

This Court summarized Plaintiffs' allegations in its December 20, 2006 Opinion denying Defendants' motion to dismiss as follows:

Medical transcription entails the conversion of voice information dictated by health care professionals into an electronic format or written report. (CAC at ¶ 18.) Dictation is forwarded electronically to a MedQuist transcriptionist who pulls up a computer template for the particular type of report or account and transcribes the medical report. (CAC at ¶ 19.) The report is then transmitted electronically to MedQuist's computer system for client billing and payroll. (Id.) Although the transcription technology employed by MedQuist has changed over the years, the basis for its payment of medical transcriptionists has not. (Id. at ¶ 20.) Transcriptionists are paid according to the number of "lines" they transcribe, and MedQuist agreed that a line would consist of 65 "characters." (Id. at ¶ 21.) Under the agreements the transcriptionists had with MedQuist, "characters" were defined as all characters typed by a transcriptionists and appearing in a document, including blank spaces between words and the actual character count of words generated by macros and expanders. (Id. at ¶[¶] 24-26, 28-29, 31.) For transcriptionists payroll purposes, the line count was to be determined by accurately counting the total number of characters and dividing by 65. According to Plaintiffs, MedQuist repeatedly affirmed its agreement to pay transcriptionists based on the 65-character line count (with such statements being made by officers of MedQuist, on MedQuist's web site, and through representations made by MedQuist when it acquired a new business.) (Id. at ¶ 29, 31.)

According to Plaintiffs, such representations and assurances were false. (Id. at ¶ 33.) Despite agreeing to pay transcriptionists based on a 65-character defined line, MedQuist systematically undercounted its transcriptionists' output and manipulated the number of characters and/or lines used to calculate payments to transcriptionists. (Id.) According to Plaintiffs, to effectuate their scheme, MedQuist manipulated the MedQuist computer systems used for billing and payroll purposes and falsified line counts to achieve a 2:1 or even 3:1 billing-to-payroll ratio. (Id. at ¶ 37.) (Docket Item 30 at 4-6) (footnotes omitted).

B. Procedural History and Parties' Discovery

After the three actions were consolidated into the Myers Docket before this Court and after Plaintiffs filed the Consolidated Amended Complaint, Defendants filed a motion to dismiss [Docket Item 17], which this Court denied in its December 20, 2006 Opinion and Order [Docket Items 30 and 31]. After MedQuist filed its Answer to the Consolidated Amended Complaint [Docket Item 33], the parties engaged in extensive discovery over the course of approximately one year.*fn1 The parties' discovery resulted in considerable motion practice before Magistrate Judge Donio [e.g., Docket Items 60, 65]. As Plaintiffs represent in the brief in support of their motion for settlement approval:

In total, the parties conducted approximately two dozen depositions of relevant parties and witnesses. Plaintiffs deposed nearly all of the senior executives that worked at MedQuist during the Class Period. Plaintiffs deposed numerous computer and technical employees from MedQuist concerning the operation of MedQuist's computer systems and transcription platforms. Plaintiffs also deposed numerous MedQuist employees who hired and recruited transcriptionists during the Class Period. (Pls.' Br. at 3.) According to Plaintiffs, over the course of this discovery period, Defendants produced, and Plaintiffs reviewed, approximately one million pages of documents. (Id.) During this time, Plaintiffs also retained two experts (one technical specialist and one industry medical transcription industry analyst). (Id. at 3-4.)

C. Settlement Negotiations and Proposed Class Settlement

As Plaintiffs indicate in their submissions to the Court, and as became clear at the March 27, 2009 hearing, notwithstanding Plaintiffs' expansive discovery and investigative work, no evidence emerged to support their allegations that MedQuist had systematically underpaid its transcriptionists. Plaintiffs' computer expert reviewed thousands of pages of medical reports generated by class members, as well as other data MedQuist produced during discovery, and was unable to find any evidence of a pattern of underpayment through the undercounting of lines. As Plaintiffs represented at the March 27, 2009 hearing, their technical expert, in reviewing the data, found no evidence to suggest that MedQuist undercounted lines in transcription reports at a more frequent rate than it overcounted such lines. Simply put, the expert found anecdotes of undercounting and overcounting, but, according to Plaintiffs' own expert, such traces could not reasonably be construed as anything beyond "random noise," i.e., no pattern of undercounting was detected.

In addition, over the course of their depositions, "a number of Plaintiffs' declarants retracted, contradicted or otherwise undermined the evidence upon which Plaintiffs intended to rely." (Pls.' Br. at 4.) In particular, as the parties indicated at the March 27, 2009 hearing, two of the individually named Plaintiffs -- Dorothy Myers and Wendy Svoboda -- reexamined their reports which had formed the basis of Plaintiffs' allegations of undercounting and underpayment, and, during their depositions, testified that MedQuist had, in fact, accurately counted the lines in the reports. In early 2008, the parties commenced settlement negotiations, and, on April 23, 2008, the Court entered an Order [Docket Item 115] staying the case to permit the parties' settlement negotiations to proceed.

On September 22, 2008, following months of negotiations between the parties, Plaintiffs filed a motion seeking preliminary approval of the proposed class settlement [Docket Item 117]. Under the terms of the proposed settlement, Defendants would consent to the entry by the Court of an injunction requiring them to take various actions aimed at ensuring the transparency of the very compensation policies that gave rise to this dispute. (Docket Item 133 Ex. A-1 at 3-4.) Specifically, MedQuist would agree to an injunction requiring it to take the following actions:

(a) implement and disseminate a formal written policy that expressly discloses all definitions of payroll lines used by MedQuist transcription platforms for compensating medical transcriptionists; (b) make all definitions of payroll lines used by MedQuist transcription platforms available to MedQuist employees, candidates for employment, and the general public by including it within MedQuist's internet website; (c) make all definitions of payroll lines used by MedQuist transcription platforms available to MedQuist employees . . . by including it in MedQuist's employee handbook and other materials distributed to medical transcriptionists for their ongoing reference; (d) make available all definitions of payroll lines used by MedQuist transcription platforms to candidates for employment as a medical transcriptionist prior to or in connection with any verbal or written offer of employment; (e) identify for all medical transcriptionists who are to be paid based on a payroll line unit of measure, prior to or in connection with any verbal or written offer of employment, the payroll line definition that will be used to calculate their pay; and (f) provide written notice to the affected trancriptionist employees in the event that MedQuist alters the definition of a payroll line or otherwise causes transcription work to be calculated for payroll purposes according to a different payroll line definition. (Id.)

Additionally, pursuant to the terms of the proposed settlement, MedQuist would agree to pay a total of $1.5 million to a settlement fund. (Id. at 2.) Under the proposed settlement, the settlement administration costs (estimated to be $150,000) and Plaintiffs' attorneys' costs (of approximately $248,000) would be deducted from the settlement fund, the remainder of which (but not less than $1 million) would be given to the Association for Healthcare Documentation and Integrity ("AHDI") "to fund programs for the general benefit of medical transcriptionists and the medical transcription industry."*fn2

(Id. at 11.) The proposed settlement further provides that "[q]ualifying class members will also be eligible to participate in certain AHDI programs free of charge. The value of the free educational and professional courses provided by AHDI is up to $200 per class member." (Id. at 11-12.) Significantly, Plaintiffs' attorneys would be awarded no fees under the terms of the proposed settlement. (Id. at 11.)

D. Preliminary Settlement Approval and Class Response

In its October 17, 2008 Letter Order, the Court sought supplemental briefing from the parties to address why "the parties elected the method of distribution of the settlement fund reflected in the proposed agreement, under which the fund is to be directed to . . . AHDI," and whether it was "in the interest of the absent class members for the settlement fund to be directed to AHDI rather than being distributed among the class members." (Docket Item 118 at 1.) In their joint letter in response to the Court's Order, the parties indicated that MedQuist made clear throughout the negotiations period that it was unwilling to agree to a settlement in which direct payments to the class members would be made, and that no settlement could be reached if the Plaintiffs insisted on such direct payments. (Docket Item 119 at 2.) With regard to the distribution of the settlement fund to AHDI, the parties explain that in selecting an organization to which a payment could be made in order to benefit the class, Plaintiffs and Defendants turned to their respective industry experts in order to "identify an organization dedicated to benefit[t]ing medical transcriptionists individually and collectively," and that AHDI was the only organization that met such requirements.*fn3 (Id.)

On November 7, 2008, the Court convened a hearing to address Plaintiffs' unopposed motion for preliminary approval of the class settlement. On December 23, 2008, the Court entered an Order Preliminarily Approving Settlement and Providing for Notice (the "Preliminary Approval Order") [Docket Item 133], which, inter alia, directed the Settlement Administrator to distribute a Notice of Pendency and Proposed Settlement of Class Action (the "Notice") to all "Settlement Class Members who can be identified with reasonable effort," to publish the Complaint on a website, to publish a Summary Notice of Settlement in two separate issues of USA Today. (Docket Item 133 at 4.) The Preliminary Approval Order scheduled the Final Settlement Hearing for March 26, 2009, a date which, with the consent of the parties, the Court subsequently adjourned by one day to March 27, 2009. (Docket Item 295 at 1.)

The Notice was subsequently mailed to approximately 28,000 potential class members. (Lake Decl. ¶ 6.) Between the responses received by the Settlement Administrator, (id. at ¶ 8), and those sent to the Court, 202 potential class members opted to exclude themselves from the proposed settlement, and 153 potential class members wrote to object to the settlement; in all, these submissions amount to less than 1.7% of the class members. The vast majority of these objections target the distribution of the settlement fund to AHDI, with the objectors asserting primarily that the settlement fund should be divided and distributed among the class members directly. Additionally, approximately nineteen objectors state that the funds should not be distributed to AHDI,*fn4 stating either (1) that AHDI does not represent the interests of American transcriptionists because it advocates on behalf of those who wish to outsource transcription work overseas,*fn5 or (2) that AHDI benefits the transcription industry, not transcriptionists, and is too closely tied to MedQuist.*fn6

E. Final Settlement Hearing

On March 27, 2009, the Court convened a Final Settlement Hearing to review Plaintiffs' motion for certification, settlement approval, and reimbursement of costs. No class member appeared at the hearing to express an opinion about the settlement's terms.

At the hearing, the Court heard the testimony of Dr. Peter Preziosi, the Executive Director of AHDI.*fn7 Dr. Preziosi testified that AHDI advocates on behalf of medical transcriptionists in a variety of contexts, including before Congress and to different health organizations. As to the concerns raised by some objectors concerning whether AHDI's aim is to assist transcriptionists or the transcription industry, according to Dr. Preziosi, the organization has approximately 7,000 members, the vast majority of whom are individual transcriptionists. Although AHDI counts among its members a small number of corporations, including MedQuist, only a small percentage of AHDI's membership dues are attributable to corporate members, with the great bulk of membership dues coming from individual members.*fn8 With regard to the sources of the organization's funding, Dr. Preziosi testified that approximately 45% comes from membership dues; 25% comes from sales of its products, services, and programs to transcriptionists; 15% comes from revenues from the organization's annual convention; and the remainder comes from advertising sales from the organization's journal, newsletter, and website. Dr. Preziosi also indicated that AHDI has a position statement related to the best practices for transcriptionist compensation, and offers transcriptionists professional courses on how to negotiate favorable terms of compensation. As to the belief of the eighteen objectors that AHDI advocates on behalf of those who wish to see transcription work outsourced to other countries, Dr. Preziosi testified that although AHDI's online courses are offered worldwide, the organization does not advocate in favor of foreign outsourcing.

With regard to the courses that AHDI agreed, through the settlement, to make available to class members, Dr. Preziosi stated that 10,000 places in a variety of courses were set aside for class members. At the hearing, the Court noted that the deadline of December 31, 2009 contained in the proposed settlement for class members to sign up for AHDI's courses afforded class members a somewhat narrow window in which to take advantage of the settlement, and the parties, along with Dr. Preziosi on behalf of AHDI, agreed to extend the registration deadline until July 1, 2010. Thus, as revised, a Class Member will have until July 1, 2010 to enroll in one of the AHDI offerings, which may be completed after that date.

Finally, with regard to the Court's questions concerning the financial stability of AHDI, Dr. Preziosi indicated that AHDI is solvent and would not risk losing the settlement fund to a judgment creditor. According to Dr. Preziosi, although the organization encountered financial difficulties before he became Executive Director in 2003, it has been profitable since 2005 and is subject to no judgments or claims of debtors.

Upon reviewing the terms of the proposed settlement, the arguments of counsel at the hearing, and the testimony of Dr. Preziosi, the Court informed counsel at the March 27, 2009 hearing that it would grant Plaintiffs' unopposed motion for class certification, settlement approval, and cost reimbursement, and that its reasoning would be ...


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