Employment Law Daily With proposed $240M settlement, FedEx misclassification litigation may be winding down
Monday, June 20, 2016

With proposed $240M settlement, FedEx misclassification litigation may be winding down

By Joy P. Waltemath, J.D. Unopposed motions for preliminary approval of class settlements in 20 statewide misclassification class actions involving FedEx Ground were filed June 15, representing an estimated $240 million to be paid by FedEx to resolve the suits. The 20 cases were transferred to the Northern District of Indiana beginning in August 2005 for consolidated discovery and coordinated adjudication (In re FedEx Ground Package System, Inc. Employment Practices Litigation, 3:05-md-00527-RLMCAN) because they posed similar challenges under their respective state laws to the legality of FedEx Ground’s classification of its pickup and delivery drivers as independent contractors. Settle it now. According to the omnibus memorandum of law in support of the motions, the cases were litigated extensively in the district court between 2005 and 2010, and in the Seventh Circuit between 2011 and the present. And, following six years of hard-fought litigation and five years on appeal—which resulted in decisions that drivers are employees and not independent contractors under the laws of Kansas, California, and Oregon—the parties undertook good faith settlement negotiations in an effort to settle all of the remaining MDL cases. If the settlements are approved by the court, the MDL litigation begun nearly 12 years ago, will be finally concluded; absent settlement, final resolution of the cases "is still years away." Notably, the class settlements presented for preliminary approval are the product of 21 days of mediation. "Each case was mediated independently, unconditionally, and at arms-length with the assistance of an experienced and skilled mediator." Formal discovery on the merits of the claims was extensive and was completed. While formal damage discovery was not conducted, FedEx Ground produced all of the data that would have been produced in damages discovery. According to the plaintiffs, they obtained all data they needed to evaluate and value the class damage claims in each case. Plaintiffs’ damage expert then developed comprehensive damage exposure models according to the theories of liability and the available damages under the substantive law in each case (e.g., wage deductions, deceptive trade practices, rescission, and unjust enrichment). Similarly, counsel conducted a careful risk analysis in each case in light of the strengths and weaknesses of the various claims and defenses under each state’s law. The proposed settlement involves class actions filed in the following jurisdictions: Alabama; Arizona; Georgia; Indiana; Kansas; Louisiana; Maryland; Minnesota; New Jersey; New York; North Carolina; Ohio; Pennsylvania; Rhode Island; South Carolina; Tennessee; Texas; Utah; West Virginia; and Wisconsin. Final approval granted in California. Also on June 15, the Northern District of California granted final approval of a $226.5M settlement it had preliminarily approved in April. In that case (Alexander v. FedEx Ground Package System, Inc.), the court had expressed concern that the 77-percent response rate, while high, was not higher given the substantial recoveries for many class members. Accordingly, it ordered the plaintiffs to make additional outreach to all nonclaiming members. It also deferred ruling on the attorneys’ fee motion, in which the plaintiffs sought 22 percent of the gross settlement fund of $226,500,000, finding that more evidence was needed to demonstrate an award of 25-30 percent of "Omnibus work" in the MDL litigation. Granting final approval outright, the court found that the plaintiffs had made additional efforts to reach out to nonclaiming class members so that 98 percent of the net settlement fund is being claimed. There were only approximately 100 people who have not filed claims, and all reasonable efforts to contact these individuals have been exhausted. Attorneys’ fees. As for the remaining issue, fees and costs, the plaintiffs asked to be awarded 22 percent of the global settlement fund, or $49.83 million. Although a percentage award in a megafund case can be 25 percent or even as high as 30-40 percent, noted the court, typically the percentage award in such a case is substantially less than the 25 percent benchmark applicable to typical class settlements in the circuit. In fact, a proposed award of 22 percent, while not without precedent, is well above the typical range in a megafund case, it concluded. Plaintiffs asserted a lodestar of between $12.4 and $14 million. Based on the $12.4 million lodestar, they needed a multiplier of approximately 4 to get to the requested $49.93 million in fees. The court found that multiplier was not warranted for several reasons. First, a more typical multiplier for a megafund case is 3 or less; second, their lodestar is calculated on current billing rates, which compensates in part for the delay and length of this litigation; and third, the size of the lodestar has been influenced by the number of attorneys involved in this case. Fourth, rigorous billing judgment should be exercised where multiple counsel are involved. Plus, plaintiffs’ counsel will likely receive additional fee awards as the other cases stemming from the MDL are resolved. However, the court found that a multiplier of 3 was proper due to compelling circumstances in the case, including its 11 years of litigation, the MDL proceedings, and its sizeable risk, "having to appeal the case after losing on summary judgment before ultimately prevailing." The court also noted that plaintiffs’ counsel provided a high quality of representation and obtained excellent results. No objection to the fee request was filed. Accordingly, applying a multiplier of 3 to the $12.4 million lodestar, the court awarded $37.2 million in fees, which represents 16.4 percent of the common fund, consistent with the higher end of awards in megafund cases and well within the range of reasonableness.

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