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Morgan v. CSW Inc.

United States District Court, E.D. Wisconsin

July 25, 2017

DWAYNE MORGAN, ET AL., Plaintiffs,
v.
CSW INC, ET AL., Defendants.

          ORDER GRANTING MOTION TO INVALIDATE SETTLEMENTS

          WILLIAM C. GRIESBACH, CHIEF JUDGE UNITED STATES DISTRICT COURT.

         Plaintiffs Dwayne Morgan, Clint Robinson, Paul Robinson, Michael Owens, Marques Stewart, Cornelius Buford, Shaun Saunders, Daunte Davis, and Kendall Holmes brought this action on behalf of themselves and all other persons similarly situated against Defendants CSW, Inc. and Northern Concrete Construction, Inc. (“Northern Concrete”), alleging violations of the Fair Labor Standards Act (“FLSA”) and Wisconsin Wage and Hour Law. The FLSA claim is brought as an “opt-in” collective action pursuant to Section 16(b) of the FLSA, 29 U.S.C. § 216(b). The Wisconsin wage and hour claim is brought as an “opt-out” Rule 23 Class Action. Fed.R.Civ.P. 23. The amended complaint alleges that the plaintiff employees were employed directly by CSW, a Mississippi corporation that recruits and hires construction workers to work on construction projects throughout the country. During the relevant time period, the plaintiff employees worked under a contract between CSW and Northern Concrete at Northern Concrete's Wisconsin job sites. Plaintiffs allege that they were joint employees of both CSW and Northern Concrete, and that both defendants are jointly and severally liable for violations of federal and state laws governing minimum wages. CSW is currently unrepresented and has failed to answer the amended complaint, though plaintiffs have not moved for default. Northern Concrete denies liability as a joint employer and claims that CSW contractually agreed to assume full responsibility for all human resources functions.

         Currently before the court is a motion to invalidate the alleged settlements made without court approval between CSW and five of the named plaintiffs-Paul Robinson, Clint Robinson, Shaun Saunders, Michael Owens, and Cornelius Buford (collectively the “Withdrawal Plaintiffs”)-and to issue a court-authorized notice that the Withdrawal Plaintiffs remain a party in the lawsuit. Also before the court is plaintiffs' motion to approve a settlement reached between plaintiffs' counsel and CSW and for leave to withdraw all claims against CSW pursuant to that settlement. Northern Concrete opposes both motions. For the reasons set forth below, the motion to invalidate the private settlements will be granted. The motion for approval of the settlement reached by plaintiffs' counsel with CSW will be set on the court's calendar for hearing.

         BACKGROUND

         On September 29, 2016, Plaintiffs Dwayne Morgan, Clint Robinson, Paul Robinson, Michael Owens, Marques Stewart, Cornelius Buford, and Shaun Saunders filed this action on behalf of themselves and all others similarly situated. Compl., ECF No. 1. At all times relevant, the plaintiffs were employees of CSW and were referred by CSW to perform work in Wisconsin for Northern Concrete. Plaintiffs alleged violations of the minimum wage and overtime provisions of the FLSA, and the minimum wage, overtime, travel pay, and full wage payment guarantees of Wisconsin law. Each named plaintiff signed a consent form in which they opted in to participate as a named plaintiff in the lawsuit against CSW and Northern Concrete. ECF No. 1-1 at 7-8. Kendell Holmes, though not originally named as a plaintiff, opted into the action on December 19, 2016. ECF No. 18.

         Clint Robinson, Paul Robinson, and Shaun Saunders contacted plaintiffs' counsel in November 2016 seeking to withdraw from this lawsuit. Ho Decl., ECF No. 29, ¶ 2. Plaintiffs' counsel sent the three named plaintiffs withdrawal forms on November 29, 2016 and the three named plaintiffs executed the forms the same day. ECF Nos. 53-2, 53-3, 53-4. Michael Owens separately contacted plaintiffs' counsel requesting to withdraw and executed his withdrawal on December 6, 2016. ECF No. 53-5. On January 18, 2017, Cornelius Buford met with plaintiffs' counsel and requested money. Ho Decl. ¶ 5. When he was told that the law firm could not pay him to be a plaintiff or class representative, Buford left the meeting and sent a text message to another attorney at the firm indicating he wished to withdraw from the lawsuit. Id. Buford faxed a withdrawal form to plaintiffs' counsel on January 19, 2017 despite not being provided with a withdrawal form. Id. at ¶ 6. CSW President Brad Lott contacted plaintiffs' counsel the same day to confirm that Buford's withdrawal form had been received. Id. Plaintiffs' counsel noted in a letter to Clint Robinson, Paul Robinson, and Shaun Saunders that he had not been provided with any explanation as to why the Withdrawal Plaintiffs were seeking to withdraw from the lawsuit. ECF No. 53-1 at 2.

         On December 6, 2016, Marques Stewart received a telephone call from “T, ” an individual he knew to be a CSW representative. Stewart Decl., ECF No. 30, ¶¶ 3-4. T offered Stewart $200 in exchange for dropping the lawsuit against CSW and Northern Concrete. Id. at 4. T said that other named plaintiffs had agreed to drop the lawsuit after receiving a few hundred dollars in cash payments from CSW. Id. T also contacted Dwayne Morgan on several occasions and indicated that Brad Lott asked him to act as an intermediary on behalf of CSW. Morgan Decl., ECF No. 31, ¶ 2. T offered Morgan new employment with CSW in exchange for his agreement to drop the lawsuit and again stated that several other plaintiffs had either accepted an offer of employment or payment in exchange for dropping the lawsuit. Id. at ¶ 3. After Morgan told T he would agree to drop the lawsuit in exchange for $600, T informed Morgan he would first need to speak with Lott. Id. at ¶¶ 4-5. T then told Morgan that the most he could recover through the lawsuit was $84 but that Lott would pay him $500 to drop the lawsuit or $1000 if he convinced Kendell Holmes to also drop the lawsuit. Id. at ¶¶ 5-6.

         As of the date of this order, plaintiffs' counsel has not submitted the Withdrawal Plaintiffs' withdrawal forms to the court. Counsel contends, on behalf of the non-withdrawal plaintiffs, that the Withdrawal Plaintiffs only sought to withdraw from the litigation because they first agreed to private settlements with CSW. Plaintiffs' counsel filed this motion to invalidate the alleged settlements as improper attempts to release FLSA and Wisconsin law claims without court approval. Northern Concrete asserts that the motion should be denied because the Withdrawal Plaintiffs only used the withdrawals drafted by plaintiffs' counsel-not private settlement contracts or releases which waive an employee's right to receive wages required by law.

         In the meantime, the non-withdrawal plaintiffs have reached their own settlement with CSW and have filed a motion to withdraw all of their claims against CSW subject to the following conditions: (1) CSW will make an aggregate payment of $1, 600 to plaintiffs; (2) CSW will voluntarily provide the plaintiffs information concerning the extent of control that Northern Concrete exercised over the men referred by CSW to work for Northern Concrete; and (3) CSW will provide plaintiffs current contact information for the men that CSW sent to work for Northern Concrete. Northern Concrete opposes the proposed settlement on the ground that counsel for plaintiffs has not provided the information the court needs in order to approve the settlement with CSW, that CSW has failed to comply with the requirements for settlement of collective FLSA and Rule 23 Class actions, and that the settlement encourages collusion between plaintiffs and CSW and would be prejudicial to Northern Concrete.

         ANALYSIS

         A. Motion to Invalidate Settlements

         Plaintiffs argue that the withdrawals executed by Clint and Paul Robinson, Saunders, Owens, and Buford were filed as a condition of private settlements between the Withdrawal Plaintiffs and CSW. Although those plaintiffs did not provide the underlying reasons for their withdrawals, a CSW representative allegedly told Morgan and Stewart that other named plaintiffs had accepted CSW's offer of either payment or employment in exchange for dropping all claims against CSW and Northern Concrete. Plaintiffs assert that any settlement agreements between the Withdrawal Plaintiffs and CSW must be invalidated for the lack of court approval.

         Federal Rule of Civil Procedure 41(a)(1)(A) permits a plaintiff to voluntarily dismiss his or her action without a court order subject to “an applicable federal statute.” The issue here is whether the FLSA is an applicable federal statute under Rule 41 that would require court approval before a plaintiff can dismiss an action. The FLSA was designed “to protect certain groups of the population from substandard wages and excessive hours” and established minimum wages and maximum hours standards in recognition of the unequal bargaining power between employers and employees. Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 706-07 (1945). The underlying policy considerations of the FLSA forbid the waiver of basic minimum and overtime wages under the Act as well as waiver of an employee's right to liquidated damages. Id. at 707.

         The Seventh Circuit has not yet determined whether the FLSA is an applicable federal statute under Rule 41, but it has characterized the FLSA in dicta as a federal law that “either forclose[s] private settlements or require[s] their supervision by a public official.” Dye v. Wargo, 253 F.3d 296, 302 (7th Cir. 2001). The Second Circuit has explicitly held that “in light of the unique policy considerations underlying the FLSA, ” the FLSA is within Rule 41's applicable federal statute and that “Rule 41(a)(1)(A)(ii) stipulated dismissals settling FLSA claims with prejudice require the approval of the district court or the DOL to take effect.” Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199, 206 (2d Cir. 2015). Although the Second Circuit did not resolve the question of whether a dismissal without prejudice requires court approval under Rule 41, a district court in Florida has held that a stipulated dismissal of a FLSA action requires court approval for any settlements regardless of whether the dismissal is with or without prejudice. Turner v. Interline Brands, Inc., Case No. ...


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