The opinion of the court was delivered by: Falk,u.s.m.j.
This case and the companion actions described below arise from a series of complaints initiated against Liberty Travel, Inc. by former employees for unpaid overtime. On July 9, 2010, the parties reached a global settlement in principle. The Court provisionally certified a settlement class and granted preliminarily approval of the class action settlement on November 19, 2010. CM/ECF No. 97. Presently before the Court are three related motions seeking (a) final certification of the settlement class; (b) final approval of the class action settlement; (c) approval of the collective action settlement; (d) attorneys‟ fees and costs; and (e) service payments for named Plaintiffs. CM/ ECF Nos. 98, 102, 105. A fairness hearing was held on March 14, 2011. CM/ECF No. 113. For the reasons set forth below, Plaintiffs‟ motions are granted in their entirety.
Defendant Liberty Travel, Inc. ("Liberty") operates a network of retail stores throughout the country that offer travel services (Answer ¶¶ 2, 29). The company employs travel agents to service its customers (Id. ¶ 2). Travel agents as part of their job description are required to work in excess of forty (40) hours as the position may demand (Pls.‟ Brief in Supp. of Mot. to Certify a FLSA Action Attach. 3, Ex. 3 ("Employment Agmt.") ¶ 2.2 [CM/ECF No. 15]; see also Decl. of Michael J.D. Sweeney in Supp. of Pls.‟ Renewed Mot. for Expansion of the FLSA Collective Action Class ("Aug. 28, 2009, Sweeney Decl.") Ex. D, at 25 ("There will be times when you will need to work overtime . . . .") [CM/ECF No. 53]). Plaintiffs are generally a group of former Liberty employees that worked as travel agents in the Northeastern United States.
A. Compensation Scheme for Liberty Travel Agents
Travel agents working for Liberty are compensated through a mix of weekly base pay, commissions, bonuses, and overtime for hours worked in excess of forty (40) per week (Employment Agmt. ¶¶ 3.1-3.4; Aug. 28, 2009, Sweeney Decl. Ex. A ("Joint Stip."), at 1). Overtime pay specifically is calculated using a formula that is appended to Liberty‟s form employment agreement as Exhibit A (Employment Agmt. ¶ 3.2; Joint Stip. 1). Employees eligible for overtime receive one-half (1/2) their effective hourly rate, derived from a composite of their weekly base pay and the total number of hours worked that week, for each overtime hour (Employment Agmt. Ex. A; Joint Stip. 1). The employment contract also specifies that their compensation scheme would "convert" to a fixed hourly rate once the employee exhausts all previously allocated personal time for each hour that they work under forty (40) in any given week (Employment Agmt. ¶ 3.3; Joint Stip. 1). Liberty apparently changed to a different payment model at some point in September 2008 (Pls.‟ Brief in Supp. of Mot. to Certify a FLSA Action Attach. 3 ("Fiorenzo Decl.") ¶ 12 [CM/ECF No. 15]).
Plaintiffs in these matters maintain that the formula used by Liberty to calculate overtime establishes a "diminishing" pay structure (Compl. ¶ 2). Because the overtime rate of pay is not fixed and instead dependent on the sum total of hours accumulated each week, they argue that overtime pay progressively decreases as the number of hours spent working overtime increases (Id.). Liberty contends that it properly paid overtime under applicable law by using the widely-accepted "fluctuating work week" ("FWW") method to determine the amount of overtime due to each employee (Def.‟s Brief in Opp. to Pls.‟ Mot. to Certify FLSA Representative Action and to Issue Notice 11-13). See 29 C.F.R. § 778.114 (Department of Labor interpretive rule codifying Supreme Court jurisprudence on the FWW approach to overtime); see also Urnikis-Negro v. Am. Family Prop. Serv., 616 F.3d 665, 673 (7th Cir. 2010) (discussing background and construction of § 778.114); Hunter v. Sprint Corp., 453 F. Supp. 2d 44, 55 (D.D.C. 2006) (same).
Plaintiffs initially brought suit against Liberty and its parent company, Flight Centre USA, Inc., in the U.S. District Court for the Southern District of New York under the caption Reid v. Liberty Travel, Inc. on November 17, 2008. That action was dismissed without prejudice to re-filing in the District of New Jersey for improper venue on February 20, 2009 (Decl. of Michael J.D. Sweeney in Sup. of Pls.‟ Mot. for Final Certification of the Settlement Class ("March 4, 2011, Sweeney Decl.") ¶ 1 [CM/ECF No. 100]).
On February 27, 2009, Deanna Bredbenner, Paul Gilbert and Belinda Serrano filed this putative collective action against Liberty Travel, Inc. under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq. (2006), for unpaid overtime. CM/ECF No. 1. On March 19, 2009, Carol Connell, William Krumpholz, Corrine Orchin, and Nicole Reid, filed a class action on behalf of a putative class comprised of Maryland, Massachusetts, and New York residents, against Liberty, Flight Centre, and two high-ranking Liberty executives, Gilbert Haroche and Michelle Kassner, under state labor law for similar reasons. Docket No. 09-1248, CM/ECF No. 1.*fn1 The Connell complaint was amended to include a cause of action under 29 U.S.C. § 216(b) for violation of the overtime provisions of the FLSA. Docket No. 09-1248, CM/ECF No. 4. On September 4, 2009, Leigh Anne Hubbs filed suit against Liberty Travel, Inc., Flight Centre, Gilbert Haroche, and Michelle Kassner, under the FLSA and New Jersey wage and hour law, individually and on behalf of all others similarly situated. Docket No. 09-4587, CM/ECF No. 1.
Because many of the issues involved in the Connell case were similar to those raised in Bredbenner, the Connell action was stayed pending resolution of the legal issues in Bredbenner (Sept. 2 Order, at 3 [Docket No. 09-1248, CM/ECF No. 31]). The Court ordered that "the final determination of those issues in Bredbenner will apply with equal force and effect to the FLSA claims in [Connell]" (Sept. 2 Order, at 3). For similar reasons, the Hubbs case was consolidated and stayed with Connell. Docket No. 09-1248, CM/ECF No. 43.*fn2
Only July 31, 2009, the Honorable William J. Martini conditionally certified the FLSA claim in Bredbenner as a collective action for all persons employed by Liberty as a travel agent in Delaware, Maryland, and New York, between August 13, 2006, and September 1, 2008. See Bredbenner v. Liberty Travel, Inc., No. 09-905, 2009 WL 2391279 (D.N.J. July 31, 2009); see also White v. Rick Bus Co., 743 F. Supp. 2d 380 (D.N.J. 2010) (describing two-tiered approach to class certification of FLSA claims). In all, one hundred and forty-three (143) individuals eventually opted-in to the Bredbenner action, nine (9) opted-in to the Connell action, and two (2) opted-in to the Hubbs action (March 4, 2011, Sweeney Decl. ¶¶ 6, 14, 16).
D. Joint Statement of Facts and Discovery
Prior to entering settlement negotiations, the parties had conducted an extensive investigation into the underlying claims. The parties represent that they recognized that liability could likely be resolved on summary judgment and both sides were amenable to stipulating to certain core facts (March 4, 2011 Sweeney Decl. ¶ 9). Beginning in July 2009, they worked together on crafting a joint statement of facts pursuant to Local Civil Rule 56.1 (Id.). Discovery proceeded on disputed matters.
As part of discovery, Plaintiffs‟ counsel received and analyzed a large amount of electronic discovery (Id. ¶ 19). In January 2010, Defendant deposed each of the named parties, and Plaintiffs held a 30(b)(6) deposition of Defendant (Id. ¶ 10). Plaintiffs also noticed other depositions as well, (Id. ¶ 11), and filed a motion to compel further discovery, CM/ECF No. 90.
Plaintiffs also informally interviewed several putative class members and opt-in plaintiffs to gather additional information (March 4, 2011 Sweeney Decl. ¶ 19). The parties also had the benefit of previously-obtained discovery from a distinct lawsuit against Liberty that involved twenty-nine (29) depositions, dispositive motion practice, and trial decisions (Id. ¶ 19).
E. Settlement Negotiations
The Court held in-person settlement conferences on five separate occasions since February of 2010. See CM/ECF Nos. 80, 83, 86-88. After nearly six months of negotiations, and numerous settlement conferences, the parties reached a global settlement in principle on July 9, 2010, that resolves all claims in each of the pending overtime suits (March 4, 2011 Sweeney Decl. ¶ 21). The Court oversaw the negotiation process (Id. ¶ 62). The salient terms of the settlement were memorialized on the record on July 9, 2010. See CM/ ECF No. 94.
The settlement agreement creates a common fund of $3,000,000 for: (1) settlement payments as consideration for the release of all class claims; (2) attorneys‟ fees for class counsel; (3) enhancements or "service payments" for class representatives; (4) payroll taxes associated with the settlement; and (5) claims administration expenses (Pls.‟ Mot. for Prelim. Approval of Class Settlement and Other Relief Ex. A ("Settlement Agmt.") § III.B.1 [CM/ECF No. 96]). It contemplates the prospective certification of a state law settlement class (Id. § II.OO). Workers eligible to receive a payout under the settlement include all named plaintiffs, all state law class members who do not affirmatively opt-out, and all class members who affirmatively opted-in to one of the FLSA actions (Id. § II.OO (cross-referencing § II.N)).
The common fund will be distributed in the first instance to qualifying class members, less their pro-rata share of attorneys‟ fees, and to satisfy any "service payments" approved by the Court (Id. § III.B.1.f-e). All class members who timely file a valid claim will receive one and a half (1.5) times their hourly rate, based on a forty (40) hour work week, for each overtime hour they worked during the class period less overtime already paid to them by Liberty (Id. § II.S). All original opt-in plaintiffs will also receive a premium equal to twenty-five percent (25%) of their total overtime claim (Id. § II.S). The minimum payout is $50 (Id. § II.S). Fifty percent (50%) of the total payment will constitute wages, subject to income taxation, and the other fifty percent (50%) will constitute liquidated damages (Id. § III.B.1.c). The remaining money will be used to satisfy claims administration expenses and payroll taxes associated with the settlement payout (Id. § III.B.1.g). Finally, Liberty will retain any unused funds (Id. § III.B.1.g).
G. Preliminary Approval and Notice
On November 19, 2010, the Court provisionally certified for purposes of settling the state law claims only, see In re Gen. Motors Corp. Pick-up Truck Fuel Tank Prods Liability Litig., 55 F.3d 768, 792 (3d Cir.), cert. denied, 516 U.S. 824 (1995) (discussing and approving use of settlement-only classes), a class consisting of all individuals who worked as full-time Liberty travel agents:
(1) in Maryland between March 19, 2006, and August 31, 2008;
(2) in Massachusetts between March 19, 2007, and August 31, 2008;
(3) in New Jersey between September 4, 2007, and August 31, 2008; and
(4) in New York between March 19, 2003, and August 31, 2008 (Nov. 19 Order ¶ 31 [CM/ECF No. 97]). The Court also appointed Getman & Sweeney, PLLC as class counsel, preliminarily approved the class action settlement of state claims as fair, and approved the notice and claim forms used to apprise potential class members about the lawsuit and fairness hearing (Id. ¶¶ 21, 38, 41).
Following preliminary approval of the settlement class and the proposed settlement agreement, Liberty provided a list of possible class members to the claims administrator (Declaration of Bernella Lenhart in Supp. of Mot. for Final Approval of Class Action Settlement ("Lenhart Decl.") ¶ 2 [CM/ECF No. 101]). A notice package was mailed out on December 3, 2010 (Id. ¶ 3). The notice contained information on the underlying claims in each case, the terms of the settlement, the period of time within which to file objections, the ability to opt-out, and the date of the fairness hearing (Id. Ex. A "Settlement Notice")). Out of the one thousand two hundred and eighty-three (1,283) members that were mailed a package, five hundred and thirty two (536) returned a claim form to the claim administrator (Lenhart Decl. ¶¶ 2, 9).*fn3 Only six class members chose to opt-out of the settlement (Id. ¶ 10). The claims administrator received no objections whatsoever (Id. ¶ 11). The Court held a fairness hearing on Monday, March 14, 2011. See CM/ECF No. 113.
A. Certification of Settlement Class
In order to obtain class certification, a party must show that all four prerequisites of Rule 23(a) are met and that the case qualifies as at least one of the matters identified in Rule 23(b). See Baby Neal ex rel. Kanter v. Casey, 43 F.3d 48, 55 (3d Cir. 1994) (citing Wetzel v. Liberty Mut. Ins. Co., 508 F.3d 239 (3d Cir.), cert. denied, 421 U.S. 1011 (1975)). Class certification calls for a "rigorous analysis" of the factual and legal allegations. See Beck v. Maximus, Inc., 457 F.3d 291, 297 (3d Cir. 2006) (quoting Gen. Tele. Co. of Sw. v. Falcon, 457 U.S. 147, 161 (1982)); 5 James Wm. Moore et al., Moore's Federal Practice § 23.61 (3d ed. 2008). The Court therefore may conduct a "preliminary inquiry" into the merits before it determines that the requirements for class certification are satisfied. See In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 316-17 (3d Cir. 2008) (citing Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 168 (3d Cir. 2001)).
A party that seeks to certify a settlement class must satisfy the same requirements necessary to maintain a litigation class. In re Gen. Motors Corp., 55 F.3d at 778. The substantive terms of the settlement agreement may factor into certain aspects of the certification calculus. See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 619 (1997).
Plaintiffs move under Rule 23(b)(3). The Court preliminarily found that the requirements of Rules 23(a) and 23(b)(3) were met. The Court now finds that all the requirements for class certifications are in fact satisfied.
i. Rule 23(a) of the Federal Rules of Civil Procedure
A case may be certified as a class action under Rule 23 only when:
(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
(4) the representative parties will fairly and adequately protect the interests of the class.
Fed. R. Civ. P. 23(a); Weiss v. York Hosp., 745 F.2d 786, 807 (3d Cir. 1984), cert. denied, 470 U.S. 1060 (1985). These four threshold requirements are commonly referred to as "numerosity," "commonality," "typicality," and "adequacy of representation," respectively. See, e.g., In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 527 (3d Cir. 2004).
Rule 23(a)(1) requires that the size of the class is so large that joinder of all potential parties is impracticable. Impracticability does not mean impossibility. Dewey v. Volkswagen of Am., 728 F. Supp. 2d 546, 656 (D.N.J. 2010). Rather, it means that joinder would be "extremely difficult or inconvenient." Szczubelek v. Cendant Mortgage Corp., 215 F.R.D. 107, 116 (D.N.J. 2003) (citing Liberty Lincoln Mercury, Inc. v. Ford Mktg. Corp., 149 F.R.D. 65, 73 (D.N.J. 1993)). While no minimum number is required, the Third Circuit has stated that numerosity is generally met where the moving party "demonstrates that the potential number of plaintiffs exceeds 40 . . . ." Stewart v. Abraham, 275 F.3d 220, 226-27 (3d Cir. 2001) (citing 5 James Wm. Moore et al., Moore's Federal Practice § 23.22[a] (3d ed. 1999)), cert. denied, 536 U.S. 958 (2002). The Court should also take into account other factors, such as the geographic dispersion of the anticipated class. See Osgood v. Harrah‟s Entm‟t, Inc., 202 F.R.D. 115, 122 (D.N.J. 2001) (citing Herbert B. Newberg & Alba Conte, 1 Newberg on Class Actions (hereinafter Newberg on Class Actions) § 3.06, at 3-27 (3d ed. 1992)).
The numerosity requirement is satisfied in this case. The class approved by this Court contains over 1,200 putative class members, at least 526 of which have expressed interest in participating in this litigation. The members of the class are dispersed throughout four different states and the sheer number of potential plaintiffs would make joinder impracticable. See 1 Herbert B. Newberg & Alba Conte, Newberg on Class Actions § 3.05, at 3-25 (4th ed. 2002) (observing that classes "numbering in the hundreds" will alone satisfy numerosity); see also NAACP v. N. Hudson Regional Fire & Rescue, 255 F.R.D. 374, 382 (D.N.J. 2009), remanded on other grounds, 367 Fed. Appx. 297 (3d Cir. 2010) ("Even if all of the ...