Motion for Final Approval of Class Action Settlement

93 Pages·2017·2.06 MB·English

Case 1:14-cv-01062-SGB Document 21 Filed 04/21/17 Page 1 of 23
IN THE UNITED STATES COURT OF FEDERAL CLAIMS

ANDREW RUSSELL and RUTH GALLEGO, )
individually and on behalf of all others similarly )
situated, )
)
Plaintiffs, )
) Case No. 1:14-cv-01062-SGB
v. )
) The Honorable Susan G. Braden
THE UNITED STATES OF AMERICA, )
)
Defendant. )

PLAINTIFFS’ CONSENT MOTION FOR FINAL
APPROVAL OF CLASS ACTION SETTLEMENT

Pursuant to Rule 23(e) of the Rules of the United States Court of Federal Claims
(“RCFC”), Plaintiffs Andrew Russell and Ruth Gallego hereby request that the Court grant final
approval of the Class Action Settlement Agreement, see Docket Number (“Dkt. No.”) 18-3,
reached by the Plaintiffs and Defendant United States (collectively, the "Parties") and
preliminarily approved by the Court on December 21, 2016. (See Dkt. No. 20). In connection
therewith, Class Counsel also respectfully moves the Court, pursuant to Rules 23(h) and
54(d)(2), to approve their request for an award of attorneys’ fees and expenses and request for an
incentive award to the Class Representatives. Defendant's counsel advises that the United States
consents to this motion and the relief requested herein. A copy of the proposed Final Approval
Order is attached hereto as Exhibit 1. This motion is further supported by the Supplemental
Declaration of John G. Jacobs (Exhibit 2), the Declaration of RSM US LLP (Exhibit 3), the
Declaration of Kimberly C. Blanton-Day (Exhibit 4), and the Declaration of Ron Mendelsohn
(Exhibit 5), filed contemporaneously herewith.
As set forth below, the proposed settlement, which provides significant relief to the Class,
is fair, reasonable, and adequate and deserving of this Court's final approval.
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I. INTRODUCTION AND BACKGROUND
A. Procedural History of the Litigation and Settlement
Plaintiffs filed their Complaint on October 31, 2014, alleging that while employed by the
Army and Air Force Exchange Service (“AAFES”) they were entitled to receive premium pay
for working night shift hours but were not paid these benefits properly by AAFES due to a flaw
in its Kronos computer software program. (See Dkt. No. 1.) Specifically, Plaintiffs allege that
they worked regularly-scheduled non-overtime shifts where the majority of the shift hours were
between 3:00 p.m. and midnight (“second shift”) or between 11:00 p.m. and 8:00 a.m. (“third
shift”), and that they were therefore entitled to premium pay, known as night shift differential
pay (“shift differential”). Id. Plaintiffs allege that the payment of shift differential is mandated
by federal statute and regulations promulgated by the Office of Personnel Management
(“OPM”), the Department of Defense (“DoD”) and AAFES, which require that employees
working the second shift be paid a night shift differential of 7.5% of their scheduled rate of pay
for the entire shift when the majority of whole hours fall within the second shift, or 10% of their
scheduled rate of pay for the entire shift when the majority of whole hours fall within the third
shift. Id. Plaintiffs assert that because of an error in the Kronos payroll system used by AAFES,
employees often failed to receive the 7.5 percent additional premium pay for working the second
shift and the 10 percent additional premium pay for working the third shift. Id. Additionally,
Plaintiffs claim that shift differential pay is required to be included as part of the rate of basic pay
in the computation of “lump sum payments” for accrued annual leave and vacation leave for
employees upon separation from AAFES and that, as a result of the alleged failure to accurately
pay the shift differential, lump sum payments were not accurately paid to employees. Plaintiffs’
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Complaint sought relief on behalf of themselves and a putative class of similarly-situated
AAFES employees. Id.
Defendant filed a Motion to Dismiss Plaintiffs’ Complaint on March 2, 2015. (See Dkt.
No. 6.) On April 27, 2015, Plaintiffs filed an Amended Complaint to address the various issues
raised by the Motion to Dismiss. (See Dkt. No. 8.) Defendant filed its Answer to the Amended
Complaint on June 15, 2015, acknowledging that affected AAFES employees had not received
all the amounts they may be owed for working certain night shifts, but denying that Plaintiffs
were entitled to any relief and requesting that the Court enter judgment in its favor and that the
Amended Complaint be dismissed. (See Dkt. No. 10.) On August 4, 2015, the Parties filed a
Joint Motion For Extension of Time to File Their Joint Preliminary Status Report so that they
could discuss how best to proceed in the litigation and to explore a possible settlement, which
motion the Court granted. (See Dkt. Nos. 11 and 12.) The Parties agreed to a settlement process
whereby Defendant would, in consultation with Plaintiffs’ counsel, identify and retain a suitable
expert to analyze the pay records of AAFES to examine the extent and effect of the issues raised
in the litigation. (Jacobs Dec. ¶ 7.)1 In this regard, Robert B. Speakman, Ph.D, Senior
Economist at Welch Consulting, was retained as the expert to review data for over 100,000
employees and to calculate estimated damages for shift differential and lump sum leave.
The Parties thereafter engaged in regular lengthy conference calls to discuss the data and
progress of Dr. Speakman’s expert analysis and entered upon an extensive, serious, informed,

1 In connection with the motion for preliminary approval of the Settlement, Plaintiffs submitted
the Declaration Of John G. Jacobs (see Dkt. No. 18-1, cited herein as “Jacobs Dec.”). Submitted
in connection with the instant motion for final approval of the Settlement is the Supplemental
Declaration Of John G. Jacobs (cited herein as “Jacobs Supp. Dec.” and attached hereto as
Exhibit 2). A copy of the Declaration of John G. Jacobs is attached as an exhibit to the
Supplemental Declaration of John G. Jacobs for the Court’s convenience.
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and non-collusive negotiation process, culminating some sixteen months later in the proposed
settlement agreement that has been entered into and presented to the Court. Id. The terms of the
proposed settlement have been accepted by Plaintiffs, Class Counsel and the Authorized
Representative of the Attorney General. (See Dkt. No. 18-3)
On December 21, 2016, the Court granted preliminary approval of the Settlement,
certified the Settlement Class, appointed Plaintiffs’ counsel as Class Counsel, appointed
Plaintiffs as Class Representatives, appointed RSM US LLP as the Settlement Administrator,
authorized the Settlement Administrator to establish a Qualified Settlement Trust (“QST”)
within the meaning of section 468B of the Internal Revenue Code, approved the Parties’
proposed Notice Plan and directed that notice be disseminated to the Class pursuant to such plan,
and set a Final Approval Hearing date of May 11, 2017. (See Dkt. No. 20)
B. Key Terms Of The Settlement Agreement
The Settlement Class certified by the Court consists of all employees who worked for
AAFES at any time between November 1, 2008 and April 22, 2016 (the “Class Period”) and who
were eligible for night shift differential pursuant to 5 U.S.C. § 5343(f), 5 C.F.R. § 532.505 et seq.
or various similar regulations promulgated by the Department of Defense (“DoD”) and AAFES,
and who (i) worked or were scheduled to work non-overtime shifts where the majority of such
shift hours occurred either between the hours of 3:00 p.m. and midnight or between 11:00 p.m.
and 8:00 a.m. and who were not paid the night shift differential to which they were entitled; or
(ii) were eligible for accumulated and current accrued annual or vacation leave payments upon
separation under 5 U.S.C. § 5551, 5 C.F.R. § 550 et seq. or various related regulations
promulgated by the DoD and AAFES, who separated from AAFES, and who, upon separation,
were not paid all of the lump sum payments to which they were entitled. (See Dkt. No. 20, ¶ 3.)
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Excluded from the Settlement Class are all employees whose damages for night shift differential
and/or lump sum leave payments are less than a total of $10.00. Id.
Under the proposed settlement, a common Settlement Fund of $4 million has been
created for the benefit of the Settlement Class, which is to be used to pay the costs of the
Settlement Administrator, costs of providing notice to the Class and processing claims, Class
Counsel's fees and expenses, a class representative incentive award, and, after the payment of
these various items, the amount remaining (the “Net Settlement Fund”) will be used to pay
claims of class members who have opted in to the class and have filed claims and to pay to
various taxing authorities relevant taxes in connection with those amounts.
Present and former AAFES employees within the Settlement Class who wish to
participate in the Settlement and receive a payment have been given the opportunity to opt into
the class action lawsuit and file claims with the Settlement Administrator, by submitting a claim
(online at the settlement website, by mail or by fax) within a 120-day filing period. Approved
claimants will be paid one hundred percent (100%) of the calculated underpayments for shift
differential and lump sum amounts during the Class Period, provided there are sufficient funds
in the Net Settlement Fund to pay all approved claims. If there is not enough money in the Net
Settlement Fund to pay all approved claims, then claims will be paid on a pro rata basis. As
part of the Court-approved Notice Plan, each potential Settlement Class member was provided
individualized written estimates of the amounts they may receive under the Settlement, before
withholdings for applicable taxes. The amount of class members’ claims generally range from
between $10 and several hundred dollars, and in a relatively small number of instances, some
282 claimants are eligible to receive amounts varying from slightly over a thousand dollars up to
a top payment of $7,730.
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In addition, as a result of this litigation, changes have been made to the payroll system
software and methodology used by AAFES to accurately calculate shift differential pay and
lump sum pay. (Settlement Agreement, Dkt. No. 18-3, ¶ 25; Mendelsohn Dec. ¶¶ 2-7.) As part
of the settlement, AAFES has agreed to maintain these newly-implemented procedures in place
hereafter and to monitor regularly its continued compliance with the requirement to pay its
employees shift differential and lump sum payments in accordance with applicable law. Id.
Class Counsel estimates that in the years to come, AAFES employees will receive millions of
dollars more – more than the Settlement Amount here -- in shift differential and lump sum
payments as a result of the changes made to AAFES’s payroll system. (Jacobs Decl., ¶ 10.)
Settlement Class Members who opt in to the Settlement will release all shift differential
and lump sum claims arising out of or related to the claims brought in this lawsuit, or that could
have been brought, against the United States, or any other agencies or instrumentalities of the
United States, including AAFES, or any agents, employees, or officers thereof. (See Dkt. No.
18-3, ¶¶ 3(i) and 26.)2 Potential class members who do not opt into the class and file claims will
receive no payments from the Settlement, but also will not release any claims that they may
have. Notwithstanding any current employee’s failure to participate in this settlement, he or she
will nonetheless receive the full benefits of the structural relief obtained by this settlement that

2 Months after the settlement, the preliminary approval of the settlement by the Court, and the issuance of notice
pursuant to the Preliminary Approval Order, we have been informed of an issue unique to some truck drivers (who
are potential class members in this case) at three AAFES locations complaining of the way AAFES pays certain of
them. Investigation has revealed that certain AAFES truck drivers filed a lawsuit in the Court of Federal Claims on
February 21, 2017, entitled Adams v. United States, Case No.1:17-cv-00239, alleging violations under the Fair
Labor Standards Act, 29 U. S.C. § 201. A copy of the Adams complaint is attached to the Supplemental
Declaration of John G. Jacobs. As we understand the Adams complaint, it does not complain of underpayments of
shift differential and lump sum pay due to flaws in the Kronos payroll system software and methodology (which is
the subject of this suit), but rather complains of an alleged failure to pay certain truck drivers wages and overtime
pay as a result of the alleged use of a “pay chart” that often did not match up with the hours the drivers actually
worked or recorded in their daily “Logbooks.” As we understand the Adams complaint, its complaints are not the
subject of the case at bar and the release in this case will not release any claims that the Adams plaintiffs might have
in that case. In so stating, of course, no statement is intended as to the merits of the claims in Adams.
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will result in their receiving properly calculated shift differential pay (and lump sum payments)
going forward.
C. The Class Notice Comports With The Court’s Preliminary Approval
Order, Due Process And Rule 23

Before final approval of a class action can issue, notice of the settlement must be
provided to the class. RCFC 23(e) (“The court must direct notice in a reasonable manner to all
class members who would be bound by the proposal.”). In the December 21, 2016 Preliminary
Approval Order, the Court approved, as to form, manner and content, the Notice Plan specified
in the Settlement Agreement and found that it constituted “valid, due and sufficient notice to all
persons entitled thereto, that such notice is the best notice practicable under the circumstances
and that it constitutes due and sufficient notice to all persons entitled thereto and complies fully
with the requirements of RCFC 23 and of Due Process.” (Dkt. No. 20.) The Notice Plan
provided by the Settlement was comprehensive and robust.
The Parties and RSM US LLP (“RSM”), the Court-appointed Settlement Administrator,
have fully implemented the directives of that Order and the Notice Plan. (See Declaration of
RSM US LLP, attached hereto as Exhibit 3 at ¶¶ 4-12; see also Declaration of Kimberly
Blanton-Day, attached hereto as Exhibit 4 at ¶¶ 2-4.) On January 30, 2017, the Settlement
Administrator sent direct notice of the settlement via U.S. First Class Mail to the last known
postal addresses of all persons within the Settlement Class, as provided by AAFES from its
records and updated by the National Change Of Address database. RSM Decl. ¶ ¶ 5-6. On
January 30, 2017, the Settlement Administrator sent direct notice of the settlement to the email
addresses of all persons within the Settlement Class for whom AAFES had email addresses.3 Id.

3 In addition, in April of 2017, the Settlement Administrator sent an email to the email
addresses of all persons within the Settlement Class for whom AAFES had email addresses who
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at ¶¶ 7-8. Internet notice was given through a settlement website,
www.AAFESShiftDifferentialSettlement.com, established and maintained by the Settlement
Administrator and supported by Google Adwords, which contained a copy of the notice and
allowed for online claims filing. Id. at ¶¶10-11. In addition, AAFES put a link on its website,
www.shopmyexchange.com, to the settlement website. (See Jacobs Supp. Dec. ¶ 3. Blanton-Day
Dec. ¶ 3.) Finally, at all AAFES facilities, AAFES caused a poster notice, no smaller than 24
inches by 24 inches, to be posted prominently and conspicuously near any time clock where
employees regularly punch in and out for their shift (or, in the event that there was no time clock
where employees punch in and out, in a place where employees were most likely to see it). Id. ¶
4.
The class notice was comprehensive and redundant, and clearly the best practicable
notice. (Jacobs Supp. Dec. ¶ 11.) The notice complied with the Preliminary Approval Order and
satisfied all the requirements of Rule 23 and Due Process. It apprised the Settlement Class of the
items required by RCFC 23(c)(2)(B), as well as the key terms of the Settlement, Class Counsel’s
request for attorneys' fees and expenses and Class Representative incentive award, and Class
Members’ right to object to the Settlement and/or to Class Counsel’s request for payment of
attorneys' fees and/or the request for payment of a Class Representative incentive award.
II. THE SETTLEMENT WARRANTS FINAL APPROVAL
Under RCFC 23(e), a class action may be settled “only with the court's approval.” RCFC
23(e). The Court may approve the settlement “only after a hearing and on finding that [the
proposed settlement] is fair, reasonable, and adequate.” RCFC 23(e)(2). In general, “[s]ettlement
is always favored,” especially in class actions where the avoidance of formal litigation can save

had not yet opted in to the settlement reminding them of the approaching deadline to file claims.
RSM Decl. ¶ 9.
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valuable time and resources. Sabo v. United States, 102 Fed.Cl. 619, 626 (Fed. Cl. 2011); see
also Berkley v. United States, 59 Fed.Cl. 675, 681 (Fed. Cl. 2004) (“Class actions, by their
complex nature, carry with them a particularly strong public and judicial policy in favor of
settlement.”). “Settlement proposals enjoy a presumption of fairness afforded by a court's
preliminary fairness determination.” Sabo, 102 Fed.Cl. at 626; see also Dkt. No. 20 (“The court
finds, subject to the Final Approval Hearing referred to in paragraph 14 below, that the
Settlement Agreement is fundamentally fair, adequate, and reasonable”). As a result, “An
individual who objects, consequently, has a heavy burden of demonstrating that the decree is
unreasonable.” Moore v. United States, 63 Fed.Cl. 781, 784 (Fed. Cl. 2005).
After the favorability of and the presumption supporting settlement are recognized, the
Court must determine that the proposed settlement is fair, reasonable, and adequate in order to
grant it final approval. See RCFC 23(e)(2). To determine the fairness of a proposed settlement,
the Court may consider the following factors that, although not definitive, are certainly
instructive:4
a. the relative strengths of plaintiff's case compared to the proposed
settlement;

b. the recommendation of the counsel for the class regarding the proposed
settlement, taking into account the adequacy of class counsels'
representation of the class;

c. the reaction of the class members to the proposed settlement, taking into
account the adequacy of notice to the class members of the settlement
terms;

d. the fairness of the settlement to the entire class; and

e. the fairness of the provision for attorney fees;

4 See Barnes v. United States, No. 04–1335C, 2010 WL 1904503, at *2 (Fed. Cl. May 7, 2010)
(the “Federal Circuit has not provided a definitive list of factors to be used in evaluating a
proposed settlement,” but certain “factors have been used commonly for this purpose”).
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f. the ability of the defendants to withstand a greater judgment, taking into
account whether the defendant is a governmental actor or a private entity.

The Court has discretion regarding the weight to afford each factor given the factual
context of the particular case before it. Sabo, 102 Fed.Cl. at 627.
Here, as set forth below, the factors amply support final approval of the settlement.
A. The Relative Strengths of Plaintiffs’ Case In Relation To The Proposed Settlement
Favors Approving the Settlement

When determining whether to approve a settlement, the Court first should consider the
strengths of a plaintiff's case in relation to the proposed settlement. Id. The Court should
“explore how the case would proceed if the case were not settled.” Id. In considering the
relative strengths of a plaintiff's case, the court may take the following into account:
(a) The complexity, expense and likely duration of the litigation; (b) the risks of
establishing liability; (c) the risks of establishing damages; (d) the risks of
maintaining the class action through trial; (e) the reasonableness of the settlement
fund in light of the best possible recovery; (f) the reasonableness of the settlement
fund to a possible recovery in light of all the attendant risks of litigation; [and] (g)
the stage of the proceedings and the amount of discovery completed.... (Id.)

Here, if the case were not settled, Plaintiffs would face identifiable risks of establishing
liability and damages and maintaining a certified class through trial. Throughout the litigation,
Defendant maintained that Plaintiffs were not entitled to any relief and requested that the Court
enter judgment in its favor and that the lawsuit be dismissed. (See Dkt. Nos. 6 and 10.)
Although Plaintiffs and Class Counsel believe they would, in fact, succeed in satisfying the
burden Plaintiffs bear, at trial or on summary judgment, in proving each and every element of
their claims and their entitlement to relief against Defendant, there is of course no guarantee that
Plaintiffs would in fact prevail. And, presumably, Defendant would likely assert a number of
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