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John v. Pizza Hut of Southern Wisconsin, Inc.

United States District Court, W.D. Wisconsin

August 8, 2019

JOHN HOBON, individually and on behalf of all others similarly situated, Plaintiff,
v.
PIZZA HUT OF SOUTHERN WISCONSIN, INC., d/b/a PIZZA HUT, et al., Defendants.

          OPINION AND ORDER

          STEPHEN L. CROCKER Magistrate Judge

         Plaintiff John Hobon brings class action and collective action claims against Pizza Hut of Southern Wisconsin, Inc., and its Wisconsin and Illinois affiliates, alleging that defendants violated the Fair Labor Standards Act, 29 U.S.C. §§ 201-219, and Wisconsin and Illinois wage and hour laws by subjecting its delivery drivers to a vehicle reimbursement policy that failed to reasonably approximate their actual expenses. The court has subject matter jurisdiction over the FLSA claims pursuant to 28 U.S.C. § 1331, because they arise under federal law, and supplemental jurisdiction over the state law claims pursuant to 28 U.S.C. § 1367, because they are part of the same case or controversy.

         On January 10, 2019, I conditionally certified a FLSA collective action, dkt. 62. Now the parties have reached a settlement agreement and have filed a joint motion for preliminary approval of the settlement agreement negotiated by the parties, certification of the Rule 23 class, conditional certification of an amended FLSA collective class, appointment of John Hobon as class representative and the Hawks Quindel, SC law firm as class counsel, and approval of the class notice and settlement procedure outlined in the parties' agreement. Dkts. 94, 95. The court will grant the motions and set a fairness hearing for Thursday, December 12, 2019, at 1 p.m..

         BACKGROUND

         Plaintiff filed this class and collective action against defendant Pizza Hut of Southern Wisconsin, Inc. on December 20, 2017, alleging violations of the FLSA and Wisconsin wage and hour laws on behalf of certain classes of delivery drivers. Dkt. 1. He later amended his complaint to add additional defendants and class-wide allegations arising under Illinois' minimum wage laws. Dkts. 12, 31, 35. Specifically, plaintiff alleged that defendants violated the FLSA and Wisconsin and Illinois wage and hour laws by paying delivery drivers a sub-minimum wage rate for their work, requiring them to use their personal vehicles to perform their job duties, and failing to adequately reimburse the drivers for their vehicle expenses.

         After plaintiff filed his third amended complaint, defendants filed a motion to compel those class members who had signed arbitration agreements to arbitrate their claims. Dkt. 36. I granted the motion as to those putative class members who had signed arbitration agreements with defendants and allowed plaintiff time to file an amended complaint redefining the putative classes. Dkt. 43. Plaintiff filed his fourth amended complaint on October 10, 2018. Dkt. 44. Defendants denied plaintiff's allegations and raised several affirmative defenses. Dkt. 45.

         On January 14, 2019, I granted the parties' stipulated motion to conditionally certify a FLSA collective action of all persons who worked for defendants as delivery drivers at any time since December 20, 2014, who were paid less than $7.25 an hour for delivery driver work, and who did not sign arbitration agreements with defendants. Dkt. 62. Notice was sent to the putative class, and numerous employees opted in to the FLSA collective action. Dkts. 64-87.

         After the notice period closed, the parties engaged a third-party mediator to attempt to settle the case on a class-wide basis, including those drivers who had signed arbitration agreements with defendants. To facilitate these discussions, defendants produced records showing miles driven by defendants' delivery drivers since December 20, 2014, along with the per-mile reimbursement rates paid to the delivery drivers during this same time period. In consultation with an expert, class counsel determined per-mile rates that counsel believe would have adequately compensated the delivery drivers for their vehicle expenses for each year in the applicable statutory periods. After factoring in liquidated damages and civil penalties, class counsel predicted each class member's total potential damages and shared its estimates with defense counsel in advance of mediation.

         With the mediator's assistance, on March 14, 2019, the parties entered into a proposed settlement agreement, subject to the court's approval. The settlement applies to the following classes:

FLSA Collective Action Members: “All persons who have worked as a delivery driver for Defendants between December 20, 2014 and March 14, 2019 whose names appear on Exhibit 1[1] to the Settlement Agreement and who have timely returned Consent Forms” (“Collective Members”); and
Rule 23 Class Members: “All persons who have worked as a delivery driver for Defendants between December 20, 2014 and March 14, 2019, whose names appear on Exhibit 1 to the Settlement Agreement and who do not timely exclude themselves” (“Class Members”).

         Both classes include defendants' delivery drivers who signed arbitration agreements with defendants. As part of the settlement agreement, defendants agree to waive their right to compel these drivers to arbitrate the FLSA and Wisconsin and/or Illinois wage and hour claims at issue in this lawsuit, provided that the arbitration agreements otherwise remain intact. Pay-outs will be made to class members on a pro-rata basis in light of their miles driven in the applicable statutory periods, the amount of vehicle expenses allegedly under-reimbursed, and the potential penalties available.

         The parties' agreement provides the following with respect to pay-outs for class members:

• Defendants will pay a total of $500, 000 into a Settlement Fund, of which $262, 887.06 will be split equally into a Class Fund and a Collective Fund, meaning that each fund will receive $131, 443.53;
• Putative members of the FLSA Collective Class will be given an opportunity to opt-in to the FLSA settlement, if they have not already done so;
• Members of the Rule 23 Class will receive settlement funds unless they file a valid and timely request for exclusion; • Each putative Rule 23 class member shall be allocated a pro-rata share of the Class Fund, and those class members who do not exclude themselves will be paid their allocated pro-rata share;
• Two-thirds of the payout to Rule 23 class members will be treated as wages and the remaining one-third shall be treated as income but not wages;
• Each putative FLSA collective member shall be allocated a pro-rata share of the Collective Fund, and those collective members who opt-in to the settlement ...

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