UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW … · 42621948v.1 UNITED STATES DISTRICT...
Transcript of UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW … · 42621948v.1 UNITED STATES DISTRICT...
42621948v.1
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY
JEFFREY BOUDER, et al., on behalf of themselves, the general public, and all others similarly situated, Plaintiffs, vs. PRUDENTIAL FINANCIAL, INC., THE PRUDENTIAL INSURANCE CO. OF AMERICA, et al., Defendants,
Civil Action No. 06-04359 (CCC) (MF)
JIM WANG, individually and on behalf of all others similarly situated, Plaintiffs, vs. PRUDENTIAL FINANCIAL, INC., THE PRUDENTIAL INSURANCE CO. OF AMERICA, et al. Defendants.
______________________________________________________________________________
PLAINTIFFS’ MEMORANDUM OF LAW IN SUPPORT OF UNOPPOSED MOTION FOR CERTIFICATION OF SETTLEMENT CLASSES AND FOR FINAL APPROVAL
OF SETTLEMENT ______________________________________________________________________________ LOVELL STEWART HALEBIAN JACOBSON LLP John Halebian (pro hac vice) [email protected] Adam C. Mayes (pro hac vice) [email protected] Midtown Office 420 Lexington Avenue, Suite 2440 New York, NY 10170 Tel: (212) 500-5010 Fax: (212) 208-6806 Lead Counsel for Plaintiffs
WINNE, BANTA, BASRALIAN & KAHN, P.C. Kenneth K. Lehn (KL 9520) [email protected] Court Plaza South, 21 Main Street Hackensack, NJ 07601 Tel: (201) 487-3800 Fax: (201) 487-8529 Liaison Counsel for Plaintiffs [Additional counsel follows signature page]
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TABLE OF CONTENTS
I. INTRODUCTION .......................................................................................... 1
II. HISTORY OF THE LITIGATION AND SETTLEMENT ............................ 3
A. Overview of the Classes ....................................................................... 3
B. The Litigation History .......................................................................... 6
C. The Settlement ................................................................................... 13
D. Preliminary Approval of Proposed Settlement .................................. 14
III. TERMS OF THE SETTLEMENT AND THE SETTLEMENT CLASS’ REACTION ................................................................................... 14
A. The Proposed Settlement Classes ....................................................... 14
B. Terms of the Settlement and Benefits to the Class ............................ 17
D. Dismissal and Release of Claims ....................................................... 21
E. Class Notices and Communication with the Settlement Class ........... 21
1. Notice to the Settlement Class ................................................. 21
2. Opt-Out and Objections to the Settlement ............................... 22
3. The Class’ Response Has been Very Positive. ........................ 22
IV. ARGUMENT ............................................................................................... 23
A. Final Certification of the Settlement Class is Warranted ................... 23
1. The Settlement Satisfies Rule 23(a) ......................................... 24
(a) Rule 23(a)(1) – “Numerosity” ....................................... 24
(b) Rule 23(a)(2) – “Commonality” .................................... 25
(c) Rule 23(a)(3) – “Typicality” .......................................... 26
(d) Rule 23(a)(4) – “Adequacy” .......................................... 27
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2. The Settlement Class Satisfies Rule 23(b)(3) .......................... 28
(a) Common Questions of Law and Fact Predominate Over Questions Affecting Only Individual Members of the Settlement Class .................................. 28
(b) A Class Action is the Superior Means to Adjudicate Claims at Issue for Settlement Purposes ..... 29
(c) This Court is An Appropriate Forum for Resolving the Claims in Dispute .................................................... 31
B. Final Approval of the Settlement is Warranted Here ......................... 31
1. The Proposed Settlement Meets the Standards for Judicial Approval ..................................................................... 31
2. The Proposed Settlement is Fair, Reasonable, and Adequate .................................................................................. 32
(a) A Presumption of Fairness Exists .................................. 32
(b) The Girsh Factors Support the Settlement .................... 32
(i) Continued Litigation Would Be Long, Complex, and Expensive ..................................... 34
(ii) The Absence of Objections is Evidence of the Reasonableness of the Settlement ....................... 34
(iii) Stage of the Proceedings and the Amount of Discovery Completed .......................................... 35
(iv) Risks of Establishing Liability and Sustainable Damages .............................................................. 37
(v) Risk of Maintaining the Class Action Through Trial ..................................................................... 39
(vi) Ability of the Defendants to Withstand Greater Judgment ............................................................. 40
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(vii) Range of Reasonableness of the Settlement Fund in Light of the Best Possible Recovery and Attendant Risks of Litigation ....................... 41
V. CONCLUSION ............................................................................................ 44
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TABLE OF AUTHORITIES
CASES Amchem Prods. v. Windsor, 521 U.S. 591 (1997) ................................................................................... 28 Blandina v. Midland Finding, LLC, 303 F.R.D. 245 (E.D. Pa. 2014) ................................................................. 23 Careccio v. BMW of N. Am., LLC, 2010 WL 1752347 (D. N.J. Apr. 29, 2010) ................................................ 35 City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974) ....................................................................... 43 Deposit Guar. Nat’l Bank v. Roper, 445 U.S. 326 (1980) ................................................................................... 30 Erie Forge & Steel, Inc. v. Cyprus Minerals Co., 1994 WL 485803 (W.D. Pa. June 7, 1994) ................................................ 43 Gates v. Rohm & Haas Co., 2008 WL 4078456 (E.D. Pa. Aug. 22, 2008) ............................................. 35 Gen. Tel. Co. of the Sw. v. Falcon, 457 U.S. 147 (1982) ................................................................................... 30 Girsh v. Jepson, 521 F.2d 153 (3d Cir. 1975) ................................................................. 32, 36 Gooden v. Suntrust Mortg., 2013 WL 6499250 (E.D. Cal. Dec. 11, 2013) ............................................ 39 Gordon v. Chase Home Fin., LLC, 2013 WL 436445 (M.D. Fla. Feb. 5, 2013) ................................................ 39 Gustafson v. BAC Home Loans Servicing, LP, 294 F.R.D. 529 (C.D. Cal. 2013) ................................................................ 39
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Hargrove v. Sleepy’s LLC, 220 N.J. 289 (2015) ........................................................................................... passim In re AT&T Corp., 455 F.3d 160 (3d Cir. 2006) ....................................................................... 33 In re Cendant Corp. Litig., 264 F.3d 201 (3d Cir. 2001) ................................................................. 31, 36 In re Datatec Sys., Inc. Sec. Litig., 2007 WL 4225828 (D.N.J. Nov. 28, 2007) .......................................... 31, 33 In re Flonase Antitrust Litig., 2013 WL 2915606 (E.D. Pa. June 14, 2013) ........................................ 37, 41 In re Gen. Motors Corp. Pick-up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768 (3d Cir. 1995) (“GM Trucks”) ........................ 32, 35, 37, 39, 41 In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305 (3d Cir. 2008) ....................................................................... 28 In re Linerboard Antitrust Litig., 321 F. Supp. 2d 619 (E.D. Pa. 2004) ........................................ 35, 36, 42, 44 In re Merck & Co., Inc., Vytorin/Zetia Sec. Litig., 2012 WL 4482041 (D.N.J. Sept. 25, 2012) ................................................ 26 In re Philips/Magnavox Television Litig., 2012 WL 1677244 (D.N.J. May 14, 2012) ................................................. 40 In re Processed Egg Prods. Antitrust Litig., 284 F.R.D. 249 (E.D. Pa. 2012) ................................................................. 32 In re Prudential Ins. Co. of Am. Sales Prac. Litig. Agent Actions, 148 F. 3d 283 (3d Cir. 1998) (“Prudential II”) .................. 23, 24, 31, 36, 40 In re Prudential Ins. Co. of Am. Sales Practices Litig., 962 F. Supp. 450 (D.N.J. 1997) (“Prudential I”) ....................................... 29
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In re Rite Aid Corp. Sec. Litig., 396 F.3d 294 (3d Cir. 2005) ....................................................................... 33 In re Schering Plough Corp. ERISA Litig., 589 F.3d 585 (3d Cir. 2009) ................................................................. 26, 27 In re Warfarin Sodium Antitrust Litig., 391 F.3d 516 (3d Cir. 2004) ............................................... 25, 32, 35, 40, 41 Kunzelmann v. Wells Fargo Bank, N.A., 2013 WL 139913 (S.D. Fla. Jan. 10, 2013) ................................................ 39 Lazy Oil Co. v. Witco Corp., 166 F.3d 581 (3d Cir. 1999) ................................................................. 36, 43 Marcus v. BMW of N. Am., LLC, 687 F.3d 583 (3d Cir. 2012) ................................................................. 24, 28 Martinez-Santiago v. Public Storage, 312 FRD 380 (D.N.J. 2015) ....................................................................... 24 O’Keefe v. Mercedes-Benz USA, LLC, 214 F.R.D. 266 (E.D. Pa. 2003) ................................................................. 35 Pro v. Hertz Equip. Rental Corp., 2013 WL 3167736 (D.N.J. June 20, 2013) ................................................. 34 Rapp v. Green Tree Servicing, LLC, 302 F.R.D. 505 (D. Minn. 2014) ................................................................ 39 Rivet v. Office Depot, Inc., 207 F. Supp. 3d 417 (D.N.J. 2016) ............................................................. 30 Sheinberg v. Sorensen, 606 F.3d 130 (3d Cir. 2010) ....................................................................... 27 Stewart v. Abraham, 275 F.3d 220 (3d Cir. 2001) ....................................................................... 24
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Sullivan v. DB Invs., Inc., 667 F. 3d 273 (3d Cir. 2015) .......................................................... 25, 40, 41 Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011) ............................................................................... 25 STATUTES AND RULES FED. R CIV. P. 23(a) ........................................................................................ 23, 24 FED. R CIV. P. 23(b) ........................................................................................ 28, 29
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I. INTRODUCTION1
After more than 11 years of protracted and hard-fought litigation, the Parties
have reached a class and collective action settlement, which the Named Plaintiffs2,
through their undersigned counsel, request this Court to certify and approve. As
discussed in detail below, the $12.5 million cash, non-reversionary settlement
covers eligible current and former Prudential Registered Representatives, Statutory
Agents, and Financial Services Associates/Financial Professional Associates
(collectively, “FSAs”) in 12 states and FLSA Opt-Ins who filed claims as provided
in the Settlement Agreement. This proposed Settlement affords the Non-Wage
Deduction Claimants, Opt-In Plaintiffs and Class Members relief for alleged
failures by Prudential to make overtime payments under state law and the FLSA,
and for alleged unlawful payroll deductions, and certain related or derivative
claims.
1 All capitalized terms used throughout this brief shall have the same meanings ascribed to them in the Settlement Agreement.
2 Jeffrey Bouder, Vincent Cammisa, Tracy Chosa, John Costa, Joseph Gawron, Michael Todd Hinchliffe, Ryan Holmes, Sandra King, Timothy Munson, Christine Musthaler, Michele Otten, Goran Oydanich, Robert Paventi, Jason Persinger, Alan Scott Rudo, Steven Song, Julie Stalla, Julie Sullivan, Alex Tejada, David Uchansky, and Jim Wang (collectively, the “Named Plaintiffs” or “Plaintiffs”) pursue this action individually and on behalf of all others similarly situated. Edward Lennon is not named as a Plaintiff in the Third Consolidated Amended Collective and Class Action Complaint (the “Operative Complaint”); however, Mr. Lennon was included as a plaintiff in prior complaints in this litigation, and participated in substantial discovery alongside the other Plaintiffs, and is included in the term “Named Plaintiffs” herein, unless otherwise stated.
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Participating Claimants are entitled to share in the Net Settlement Proceeds
based on a formula accounting for the number of weeks during which they worked
in covered positions with Prudential. Specifically, those asserting claims for unpaid
overtime, unlawful deductions, and derivative claims, in states where State Law
Deduction Claims were previously certified will receive a pro rata share of the Net
Settlement Amount representing four times their work weeks. Participating
Claimants asserting similar claims in states where classes have not yet been
certified (but will be certified as part of this settlement) will receive a pro rata
share of the Net Settlement Amount representing three times their work weeks.
Finally, Non-Deduction Wage Claimants and FLSA Opt-In Plaintiffs asserting
overtime claims will receive a pro rata share of the Net Settlement Amount
representing one times their work weeks. No Participating Claimant is entitled to a
pro rata share of more than four times their work weeks. The overtime claimants
are paid at lower rates because the overtime claims were previously dismissed at
summary judgment, whereas certain deduction subclasses in certain states were
previously certified.
The Settlement is the product of extensive arms-length negotiations between
the parties and their experienced and informed counsel, and is in the best interests
of the Class, particularly in light of the alleged harm, and ongoing litigation risks
faced by the Parties. The Court has already preliminarily approved both the
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proposed Settlement and notice program. Notice has since been disseminated to the
Notice Recipients as directed by the Court. Plaintiffs now respectfully request that
the Court conduct a final review of the Settlement, and approve the Settlement as
fair, reasonable and adequate.
II. HISTORY OF THE LITIGATION AND SETTLEMENT
A. Factual Background and Overview of the Case
Prudential Financial, Inc. and Prudential Insurance Company of America
(collectively, “Prudential”) are financial services companies that maintain a field
force of insurance agents. In the past, this field force included Prudential
Representatives, who were unionized employees. Prudential Representatives were
parties to what was called the “Agent’s Agreement” or the “Prudential
Representatives Agreement,” and were primarily compensated by commissions
based on the business they wrote for Prudential. They also received bonuses if they
met business targets set by the company, pursuant to terms and schedules in their
collective bargaining agreements (“CBAs”) with Prudential.
The Prudential Representative position was eliminated entirely in 2006, by
which time many Prudential Representatives had transitioned to the position of
Statutory Agent, a position that was classified by Prudential as an independent
contractor. Prudential also initiated the FSA program to train new agents.
Although the specifics of the FSA program changed throughout time, generally,
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FSAs worked as employees of Prudential and if FSAs met production targets and
other requirements, they were able to complete the FSA program in two years (this
time period ultimately narrowed to five calendar quarters). At the conclusion of
the FSA period, FSAs become eligible to sign Statutory Agent contracts with
Prudential.
The main types of agents represented in this litigation break down into two
broad categories. First, the employee agents which include FSAs, the entry-level
position (denominated by different names over the years), and the former
Prudential Representative position. Prudential does not dispute that these agents
are, or were, employees. The second category, are Statutory Agents, which are
considered by Prudential to be independent contractors, not employees.3
Plaintiffs commenced this case as a FLSA collective action for alleged
unpaid overtime and as a Rule 23 class action alleging violations of Pennsylvania
state wage and hour law for unpaid overtime and State Law Deduction Claims.
The case later expanded to include putative class action claims for wage and hour
violations involving Covered Agents in 13 states. Based on various rulings by the
Court, and withdrawal and refinement of claims by amended pleadings, one
component of this Action is presently comprised of certified subclasses of FSAs
3 Herein, these groups are collectively called the “Covered Agents.”
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and Prudential Representatives in California and New York and Prudential
Representatives, only, in Pennsylvania who assert State Law Deduction Claims.4
A second component of this action concerns whether Prudential’s Statutory
Agents are independent contractors, exempt from wage and hour laws, as
Prudential contends, or employees subject to such laws, as Plaintiffs contend. In
considering this issue on Plaintiffs’ initial motion for class certification, the
Honorable Dennis Cavanaugh, after analyzing the then applicable standards for
determining independent contractor status, concluded that individualized issues
relating to whether Statutory Agents were independent contractors made class
certification improper. He therefore denied class certification to the proposed
subclasses, all of which included Statutory Agents. (ECF No. 278).
In 2015, the “right to control” test which Plaintiffs contend was previously
applied by Judge Cavanaugh, was rejected by the New Jersey Supreme Court in
Hargrove v. Sleepy’s LLC, 220 N.J. 289 (2015) as the relevant standard in
analyzing independent contractor status under New Jersey wage and hour law
4 Some states allow additional damages for related and derivative claims,
including, e.g., failure to pay business expenses, waiting time (the delay in payment of wages due to the improper deductions), prejudgment interest, and liquidated damages or penalties, plus attorneys’ fees.
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Rather, in Hargrove, the Court held the “ABC” test is the appropriate standard for
analysis.5
B. The Litigation History
On September 15, 2006, Jeffrey Bouder, Brian Kennedy, and Carol
Kennedy, filed a Class Action Complaint on behalf of themselves and others
similarly situated against Prudential in the District of New Jersey (the “Bouder
Action”). (ECF No. 1). The Bouder Plaintiffs alleged, inter alia, that Prudential
had failed to make overtime payments to them and all similarly situated “registered
representatives” employed by Prudential in violation of Pennsylvania law.
Specifically, they alleged that all registered representatives were paid on a
commission basis without premium for all hours worked in excess of forty hours
per week. They also alleged that Prudential misclassified its representatives as
exempt from overtime payment under the FLSA and Pennsylvania law.
On March 20, 2008, Jim Wang filed a wage and hour class and collective
action in the Southern District of California asserting similar overtime claims
under the FLSA and California state law, and, further alleging under California law
5 Based on the change in controlling law in Hargrove, prior to settling this action, Plaintiffs advised Prudential that they intended to renew their motion for class certification to include, at a minimum, additional subclasses for Statutory Agents in Prudential’s home state of New Jersey, as well as in Michigan, Oregon, and Washington. Prudential continues to maintain that Judge Cavanaugh’s earlier decision rejected the “right to control” test and applied a standard which encompassed the Hargrove criteria and would still have preclusive effect.
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that Prudential failed to provide meal breaks and reimbursement for necessary
business expenses (the “Wang Action”). The Wang Action was later transferred to
the District of New Jersey, and the Wang and Bouder Actions were consolidated
for all purposes (together, the “Action.”). (ECF No. 84).
Following consolidation, the Court permitted limited discovery directed to
the conditional certification of Plaintiffs’ FLSA claims. (ECF No. 21). On January
14, 2008, Plaintiff Bouder moved for conditional certification of a collective class
under the FLSA, and to facilitate notice of pendency and consent to join, which the
Court granted on March 28, 2008. (ECF Nos. 43, 53). Notice was provided on a
nationwide basis to potential plaintiffs regarding their opportunity to participate in
this case as additional named plaintiffs by means of a Court-approved “opt-in”
procedure. Approximately 360 plaintiffs with FLSA claims, in addition to all but
one of the Named Plaintiffs, timely opted into the Action, and have not opted-out.
On January 15, 2009, Plaintiffs filed a First Consolidated Amended
Collective and Class Action Complaint asserting overtime claims under the FLSA
and state law wage claims under the laws of California, Hawaii, Illinois, Indiana,
Massachusetts, Michigan, Missouri, Montana, Nevada, New Jersey, New York,
Ohio, Oregon, Pennsylvania and Washington. (ECF No. 102). After additional
discovery, on March 16, 2009, Plaintiffs filed a Second Consolidated Amended
Collective and Class Action Complaint (“Second Consolidated Amended
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Complaint”) asserting overtime claims under the FLSA and state wage claims
under the laws of the same states named in the First Consolidated Amended
Complaint. (ECF. No. 110).
On April 6, 2009, Prudential moved for partial dismissal in response to the
Second Consolidated Amended Complaint. (ECF No. 115). On December 2, 2009,
following extensive briefing by the parties, the Court granted in part and denied in
part Prudential’s motion to dismiss, and granted Plaintiffs’ request to amend the
Second Consolidated Amended Complaint. (ECF No. 136).
On January 20, 2010, Plaintiffs filed the Operative Complaint, that asserted
overtime claims under the FLSA, overtime claims under state laws, and State Law
Deduction Claims, along with derivative claims, under the laws of California,
Hawaii, Illinois, Michigan, Missouri, Montana, Nevada, New Jersey, New York,
Ohio, Oregon, Pennsylvania and Washington. (ECF No. 140).
On February 15, 2010, Prudential moved for summary judgment with
respect to the Named Plaintiffs’ FLSA claims, arguing that Plaintiffs were “outside
salesmen” and were therefore exempt from the minimum wage and maximum hour
requirements otherwise proscribed by the FLSA. Prudential also moved to
decertify the conditionally certified collective action and to dismiss the claims of
the Opt-In Plaintiffs, without prejudice. (ECF Nos. 145 & 147).
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On July 15, 2010, while Prudential’s summary judgment motion was
pending, Plaintiffs sought class certification of their state law claims in the
Operative Complaint. (ECF Nos. 208, 211). The motion sought to certify classes of
Covered Agents asserting claims under the laws of California, Hawaii, Illinois,
Michigan, Montana, New Jersey, New York, Ohio, Oregon, Pennsylvania, and
Washington. (ECF No. 211). Plaintiffs claimed that they were entitled to damages
stemming from their State Law Deduction Claims and from Prudential’s alleged
failure to pay overtime wages, and that Prudential wrongly justified its unlawful
wage deductions by misclassifying all of its insurance agents as outside
salespersons exempt from state and federal overtime and wage and hour laws, and
“by adopting policies designed to arbitrarily reclassify its captive insurance agent
workforces as independent contractors.” (ECF No. 278, at 2-3).
On August 31, 2010, Judge Cavanaugh granted Prudential’s motion for
summary judgment as to each of the Named Plaintiffs in the FLSA collective
action, (ECF Nos. 242 & 243), without further ruling on Prudential’s motion to
decertify and dismiss the FLSA collective action. Despite Plaintiffs’ contentions
that their primary duty was administrative, the Court found that Plaintiffs’ primary
duty was “making sales” and that their other activities were “incidental to or in
conjunction with” their sales efforts and therefore were to be regarded “as exempt
work.” (ECF No. 242). Under this analysis, Judge Cavanaugh concluded that
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Plaintiffs were “outside salesmen” under the provisions of the FLSA and that they
were therefore exempt from the minimum wage and maximum hour requirements
proscribed by the FLSA. (Id).
On January 18, 2013, Judge Cavanaugh denied Plaintiffs’ motion for
certification of their state law claims, finding that, among other things, the
determination of whether Statutory Agents were independent contractors, and
therefore exempt from the applicable state wage and overtime laws, would require
individualized inquiries and because Statutory Agents were in each proposed
subclass, denied certification. (ECF Nos. 277, 278, at 6-9).
Plaintiffs continue to contend that New Jersey law controls the independent
contractor determination because many of Prudential’s Statutory Agents have
contracts containing provisions that specify that they will be governed by New
Jersey law. Prudential continues to contend, on the contrary, that the substantive
law of each state where a Statutory Agent worked governs the independent
contractor determination under choice of law principles notwithstanding the
application of New Jersey law provision to other aspects of the Agents’ contract.
On February 5, 2013, Plaintiffs moved for reconsideration of the order
denying class certification. (ECF No. 279). On July 22, 2013, the Court granted
Plaintiffs’ motion and allowed Plaintiffs to file a renewed motion for class
certification (excluding Statutory Agents) of the various state classes. (ECF No.
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281). On September 13, 2013, in order to meet the Court’s previous concerns
about the manageability of this case, Plaintiffs filed a renewed motion for class
certification of the State Law Deduction Claims of FSAs and Prudential
Representatives under the laws of California, New York, and Pennsylvania
(Prudential Representatives only) and overtime claims on behalf of FSAs and
Prudential Representatives under the laws of California, Illinois, New York and
Pennsylvania (Prudential Representatives only).6 (ECF No. 287).
On February 26, 2015, following re-assignment of the case, the Court
granted in part and denied in part Plaintiffs’ renewed motion for class certification.
(ECF No. 320). Specifically, the Court granted Plaintiffs’ motion as to the State
Law Deductions Claims asserted under California, New York and Pennsylvania
law, but denied certification of overtime and derivative claims under California,
Illinois, New York and Pennsylvania law on the grounds that, inter alia, the
outside sales exemption under the state laws at issue is analogous to the FLSA
6 The phrase “State Law Deductions Claim(s),” as defined in Section III-1.60 of the Settlement Agreement, means (i) as to former Prudential Representatives and predecessor, successor or related positions, state law claims asserted with respect to alleged improper deductions from wages, all claims related thereto or contingent thereon, and claims under California law for failure to reimburse for business expenses, and (ii) as to current and former FSAs, Financial Services Professionals or Statutory Agents and predecessor, successor or related positions, state law claims asserted with respect to alleged improper deductions from wages, alleged claims relating to recapture of commissions, all claims related thereto or contingent thereon, and claims under California law for failure to reimburse for business expenses.
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definition and therefore the claims were precluded by the Court’s earlier summary
judgment ruling. (Id).
On March 12, 2015, Prudential moved for reconsideration of a portion of
this order, which Plaintiffs opposed. (ECF Nos. 323, 326). Prudential’s motion
for reconsideration was still pending at the time of Settlement. Subsequently, in or
about November 2015, in connection with Court ordered mediation proceedings,
Plaintiffs advised Prudential of their intention to seek class certification of the
State Law Deductions claims of current and former Statutory Agents under
California, Michigan, New Jersey, New York, Oregon, Pennsylvania and
Washington law, based on their theory that the New Jersey choice of law provision
in the Statutory Agent Agreement allows New Jersey law to govern the
independent contractor analysis in each of these states, and in light of the “ABC”
test articulated in Hargrove, Plaintiffs could readily establish employee status for
these Statutory Agents.
Prudential contends that New Jersey law would not govern the independent
contractor analysis for Statutory Agents who work outside New Jersey and further,
that Judge Cavanaugh’s earlier denial of Plaintiff’s motion for class certification,
now the law of the case, controls the determination of independent contractor
status even under the ABC test, thus precluding class certification.
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C. The Settlement
In June 2017, after nearly 11 years of contentious litigation, the Parties
reached a Settlement, which, as detailed below, provides for cash payment by
Prudential of $12.5 million. This settlement is the product of lengthy negotiations
that extended over a period of approximately eleven months. These negotiations
included two formal mediation sessions before Martin Scheinman, Esq., which
sessions took place on May 18, 2016 and September 26, 2016. During the course
of litigating this Action, counsel for Prudential provided Class Counsel with
documentation concerning deductions that were charged against or otherwise
assessed against, and work weeks generated by, the Named Plaintiffs, Class
Members, Opt-In Plaintiffs and Non-Deduction Wage Claimants, located in
various states and for various time periods. Moreover, over the course of this
litigation, the Parties have exchanged tens of thousands of documents and other
detailed information concerning the claims, defenses, and alleged damages at issue,
including expert reports, and counsel for the Parties took and defended dozens of
depositions throughout the country. The mediation sessions ultimately resulted in a
Memorandum of Understanding (“MOU”) for a settlement in principal, subject to
and contingent upon execution of a final settlement agreement. The settlement
negotiations were intensely contested, adversarial, non-collusive, and at arm’s
length.
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D. Preliminary Approval of Proposed Settlement
On August 1, 2017, the Court granted preliminary approval of the Settlement
(the “Preliminary Approval Order”), and ordered that class notice be disseminated
pursuant to the parties’ proposed notice program. (ECF No. 355); see also Lehn
Dec., Exs. B & C.
III. TERMS OF THE SETTLEMENT AND THE SETTLEMENT CLASS’ REACTION
The key components of the Settlement are set forth below, and a complete
description of its terms and conditions are contained in the Settlement Agreement
and the contemporaneous documents attached to the Lehn Declaration.
A. The Proposed Settlement Classes
The Settlement Agreement contemplates multiple classes, as follows: (a)
Certified Deduction Classes; (b) Deduction Classes; (c) the Non-Deduction Wage
Claimants; and (d) Opt-In Plaintiffs.
i. “Certified Deduction Classes”
The “Certified Deduction Classes” are the classes already certified in the
Action in the Settling States7 of California, New York and Pennsylvania. Members
7 Under Section III-1.59 of the Settlement Agreement, “Settling States” means
“the States where Prudential Representatives, Financial Services Associates, Financial Services Professionals or Statutory Agents and predecessor, successor or related positions covered by this Agreement work or worked and on whose behalf Named Plaintiffs have claimed violations of the labor laws of those states. They are: California, Hawaii, Illinois, Michigan, Missouri, Montana, New Jersey, New
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of the Certified Deduction Classes include any agent who holds, or held, the
position of Prudential Representative or FSA, or any predecessor, successor or
related positions in the Settling States of California and New York, or who held the
position of Prudential Representative, or any predecessor, successor or related
positions, in the Settling State of Pennsylvania during the applicable Settlement
Class Periods, which are as follows:
State Start Date End Date California March 20, 2004 August 1, 2017 New York December 15, 2002 August 1, 2017 Pennsylvania September 15, 2003 August 1, 2017
The Settlement will include Certified Deduction Class Members who have
become Settling Plaintiffs.
ii. Deduction Classes
“Deduction Classes” means the classes to be certified for purposes of
settlement by the Court in this Action in the Settling States of California, Hawaii,
Illinois, Michigan, New Jersey, New York, Oregon, Pennsylvania and Washington.
Members of the Deduction Classes include: any agent asserting State Law
Deductions claims in this Action, (i) who hold or held the position of Prudential York, Ohio, Oregon, Pennsylvania and Washington. With respect to Notice Recipients who worked in more than one Settling State, the Settlement Class Period applicable to each such state will determine the extent to which the work was performed in that state is covered by this Agreement.”
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Representative, FSA, Statutory Agent or any predecessor, successor or related
positions, in the Settling States of Hawaii, Illinois, Michigan, New Jersey, Oregon
and Washington during the applicable Settlement Class Periods, or (ii) who hold or
held the position of FSA, Statutory Agent or predecessor, successor or related
positions in the Settling State of Pennsylvania during the applicable Settlement
Class Periods, or (iii) who hold or held the position of Statutory Agent or
predecessor, successor or related positions in the Settling States of California and
New York during the applicable Settlement Class Periods, which are as follows:
State Start Date End Date California March 20, 2004 August 1, 2017 Hawaii December 15, 2002 August 1, 2017 Illinois December 15, 2003 August 1, 2017 Michigan December 15, 2002 August 1, 2017 New Jersey December 15, 2002 August 1, 2017 New York December 15, 2002 August 1, 2017 Oregon December 15, 2002 August 1, 2017 Pennsylvania September 15, 2003 August 1, 2017 Washington December 15, 2005 August 1, 2017
The Settlement will include Deduction Class Members who have become
Settling Plaintiffs.
iii. Non-Deduction Wage Claimants
“Non-Deduction Wage Claimants” means any agent, who holds or held the
position of Prudential Representative, FSA, Statutory Agent, or any predecessor,
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successor or related positions in the Settling States of Missouri, Montana and Ohio
during the applicable Settlement Class Periods, which are as follows:
State Start Date End Date Missouri December 15, 2006 August 1, 2017 Montana December 15, 2003 August 1, 2017 Ohio December 15, 2006 August 1, 2017
Only those Non-Deduction Claimants who become Participating Claimants by
filing a Qualifying Claim Form will become Settling Plaintiffs and be bound by the
Agreement.
iv. Opt-In Plaintiffs
Finally, “Opt-In Plaintiffs,” means, except for Named Plaintiffs, any
individual alleging FLSA claims who has consented to participate in the collective
action portion of this Action by timely filing an Opt-In Consent Form and who has
not subsequently opted out of the collective action prior to this Court’s Preliminary
Approval Order. Only those Opt-In Plaintiffs who become Participating Claimants
by filing a Qualifying Claim Form will become Settling Plaintiffs and be bound by
the Agreement.
B. Terms of the Settlement and Benefits to the Class
The gross settlement amount is $12.5 million. After payment of reasonable
attorneys’ fees, costs of litigation, Enhancement Awards to the Named Plaintiffs,
Incentive Awards to Opt-In Plaintiffs, reasonable payment to the Claims
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Administrator (The Garden City Group, Inc.), payment of fees incurred by the
Claims Administrator for facilitating notice and related administration costs, the
remaining sum, estimated to be close to $7.7 million (plus accrued settlement fund
interest), will be available for payment to Participating Claimants pursuant to the
Parties’ proposed settlement formula. Subject to court approval, each of the 22
Named Plaintiffs would be entitled to Enhancement Awards of up to $15,000.00
each.8 These enhancement awards are in recognition of the Named Plaintiffs’
efforts in the continued prosecution of this Action for more than 11 years. The Opt-
In Plaintiffs would also be entitled to Incentive Awards of up to $250.00 each in
recognition of their efforts to advance prosecution of the conditionally certified
collective action. See Lehn Dec., Ex. A, §§ V-3.2, V-3.3.
Moreover, the Settlement offers many benefits to all the Participating
Claimants. Thus, all Participating Claimants are entitled to share in the Net
Settlement Proceeds based on a formula accounting for the number of work weeks
during which they held the positions of Prudential Representative, FSA, Statutory
Agent or any predecessor, successor or related positions in the Settling States
during the applicable Settlement Class Periods.
8 Under the terms of the Settlement Agreement, Mr. Lennon’s Enhancement
Award would not exceed $7,500.00. See n.2 supra.
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All Class Members’ claims would be settled and released in accordance with
the terms of the Settlement Agreement, provided that they did not timely return a
Qualifying Exclusion Request. Claims of Opt-In Plaintiffs and Non-Deduction
Wage Claimants would be settled and released, in accordance with the terms of the
Settlement Agreement formula, provided they have submitted a Qualifying Claim
Form.
Each Participating Claimant will be paid a portion of the Net Settlement
Amount in accordance with the following formula:
• Non-Deduction Wage Claimants and Opt-In Plaintiffs will receive a pro rata share of the Net Settlement Amount that represents one times their work weeks.
• Members of the Deductions Classes will receive a pro rata share of
the Net Settlement Amount that represents three times their work weeks.
• Members of the Certified Deductions Classes will receive a pro rata
share of the Net Settlement Amount that represents four times their work weeks.
See Lehn Dec., Ex. A, §§ V-11 & 11.1. For purposes of the foregoing formula,
Named Plaintiffs shall be considered Non-Deduction Wage Claimants, Deductions
Class Members or Certified Deductions Class Members, consistent with the
positions they hold or held, the Settling States in which they work or worked and
the applicable Settlement Class Periods.
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The amount payable to each Participating Claimant will be calculated by
taking the Net Settlement Amount divided by the total Adjusted Work Weeks for
all Participating Claimants, and then multiplying by the total number of Adjusted
Work Weeks applicable to each Participating Claimant. If a Participating Claimant
has Adjusted Work Weeks that would result in a distribution of less than $10.00,
he or she shall not be entitled to share in the Net Settlement Fund under the
Settlement Formula, but instead shall receive one payment of $10.00 (though such
a claimant may, if appropriate, also be eligible for an Enhancement Award or
Incentive Award). See Lehn Dec., Ex. A, §§ V-11.2, VI-6.
C. Settlement Payment Checks
Settlement checks issued to Participating Claimants shall remain valid and
negotiable for a period of ninety (90) calendar days from the date of their issuance.
(Lehn Dec., Ex. A, §V-14). The sum value of all expired (non-negotiated)
settlement checks and any other undisbursed funds will be tallied by the Claims
Administrator and reported to counsel for Plaintiffs and Prudential. Thereafter,
counsel will confer to determine whether the remaining funds are of a sufficient
amount that it would be practicable to make a further distribution, or whether it
would be more practicable to distribute the remaining funds to an appropriate
charitable or non-profit organization under the cy pres doctrine. However, if the
remaining net funds exceed $50,000.00 (after accounting for costs of distribution),
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such funds will be disbursed on a pro rata basis to all Participating Claimants.
(Lehn Dec., Ex. A, §§ V-14.1 & 14.2).
D. Dismissal and Release of Claims
As set forth in the Settlement Agreement, Settling Plaintiffs will release all
claims arising out of the Operative Complaint and facts or circumstances that were
or could have been alleged in the Action, during the Settlement Class Period,
including, all rights to appeal rulings of the Court, claims for fees or costs incurred
by Class Counsel, all State Law Deduction Claims, state law overtime claims, and
all other state wage claims, of any kind. See Lehn Dec., Ex. A, §§ 1.6, 1.20, 1.36,
1.42, 1.51, and § IX. Only Opt-In Plaintiffs who become Settling Plaintiffs will
release, in addition to the foregoing claims, their FLSA overtime claims.
E. Class Notices and Communication with the Settlement Class
1. Notice to the Settlement Class
Pursuant to the Settlement, and the Court’s Preliminary Approval Order, the
Claims Administrator has transmitted a copy of the Class Notice to all known
Notice Recipients at their Last Known Address. (Kovach Dec., ¶¶ 10-15; Lehn
Dec., Ex. C). Prior to mailing Class Notice, the Claims Administrator performed an
address verification procedure to facilitate the mailing of the Class Notice to
recipients’ correct addresses. The Claims Administrator mailed Class Notice via
United States Postal pre-paid, first class mail. In addition, notice and information
concerning the proposed Settlement (including the Settlement Agreement, Class
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Notice, and the Court’s Preliminary Approval Order) were posted online at
http://www.pficlassactionsettlement.com. (Kovach Dec., ¶ 18).
2. Opt-Out and Objections to the Settlement
The Class Notice advises Class Members of the right to request exclusion
(opt-out) from the Settlement by sending a written request, clearly stating their
desire to be excluded, to the Claims Administrator, postmarked no later than
October 30, 2017. (Lehn Dec., Ex. C, at 9). The Class Notice also advises all Class
Members who elect not to opt out of the proposed settlement of their right to
object, and advises them that objections must be postmarked no later than October
30, 2017, and transmitted to lead Class Counsel, Counsel for Prudential, and the
Claims Administrator. (Lehn Dec., Ex. C, at 10).
3. The Class’ Response Has been Very Positive.
Response from the Class has been very positive. The deadline for Class
Members to submit claims, opt out, or object to the Settlement expired on October
30, 2017. The Settlement Administrator mailed 12,311 Class Notices, and reports
that as of November 16, 2017, 3,984 claims were submitted, accounting for
1,929,317 Adjusted Work Weeks. The overall take rate is already approximately
32.3%. Not a single objection was received and only three Class Members
submitted requests for exclusion. (Kovach Dec., ¶¶ 16, 21).
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IV. ARGUMENT
Class Counsel, based on their experience in complex class action litigation,
believe the proposed Settlement satisfies all the criteria for final approval, and falls
well within the range of reasonableness. Accordingly, as set forth below, Plaintiffs
request final approval of the Settlement.
A. Final Certification of the Settlement Class is Warranted
In order for a lawsuit to be maintained as a class action under Rule 23 of the
Federal Rules of Civil Procedure, a named plaintiff must establish each of the four
threshold requirements of subsection (a) of the Rule, which provides:
[o]ne or more members of a class may sue or be sued as representative parties on behalf of all only if (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 claim 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); see also Blandina v. Midland Finding, LLC, 303
F.R.D. 245, 249 (E.D. Pa. 2014); In re Prudential Ins. Co. of Am. Sales Prac. Litig.
Agent Actions, 148 F. 3d 283, 308-09 (3d Cir. 1998) (“Prudential II”). Here,
Plaintiffs move for the final certification of the Deductions Class.9 For settlement
9 The Certified Deductions Class has already been certified.
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purposes only, Prudential does not oppose Plaintiffs’ request for certification of the
Deductions Class.10
As set forth fully below, the proposed Settlement meets each element of
Rule 23 and, accordingly, merits final settlement certification.
1. The Settlement Satisfies Rule 23(a)
(a) Rule 23(a)(1) – “Numerosity”
Rule 23(a)(1) requires that the proposed class must be so numerous that
“joinder of all members is impracticable.” FED. R. CIV. P. 23(a)(1). “[G]enerally,
where the potential number of plaintiffs is likely to exceed forty members, the Rule
23(a) numerosity requirement will be met.” Martinez-Santiago v. Public Storage,
312 FRD 380, 388 (D.N.J. 2015) (citing Marcus v. BMW of N. Am., LLC, 687 F.3d
583, 595 (3d Cir. 2012)); see also Stewart v. Abraham, 275 F.3d 220, 226-27 (3d
Cir. 2001). Based on data provided by Prudential, the Claims Administrator
mailed a total of 12,311 Class Notices, and reported that by November 16, 2017, it
had received back 3,984 Qualifying Claims Forms. Thus, the numerosity
requirement is plainly met.
10 Prudential, does, however, deny the viability of Plaintiffs’ claims and their ability to achieve or maintain class certification in litigation, as applicable, and denies any liability on the merits of any of Plaintiffs’ claims as set forth in the Settlement Agreement.
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(b) Rule 23(a)(2) – “Commonality”
Rule 23(a) (2) requires that there be “questions of law or fact common to the
class,” and that the class members “have suffered the same injury.” Wal-Mart
Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2550-51 (2011). The commonality inquiry
focuses on the defendant’s conduct. See Sullivan v. DB Invs., Inc., 667 F. 3d 273,
297 (3d Cir. 2015) (“commonality is informed by the defendant’s conduct as to all
class members and any resulting injuries common to all class members”). A
finding of commonality does not require that all class members share identical
claims as long as there are common questions at the heart of the case. In re
Warfarin Sodium Antitrust Litig., 391 F.3d 516, 530 (3d Cir. 2004) (quotation
omitted); Prudential II, 148 F.3d at 310. “For purposes of Rule 23(a)(2), even a
single [common] question will do.” Wal-Mart Stores, Inc., 131 S. Ct. at 2551
(brackets in original).
Here, the settlement classes raise common questions of law and fact with
respect to their claims against Prudential. With respect to the Deduction Classes,
for each of the Settling States, Plaintiffs allege that Prudential took illegal and/or
improper deductions from earnings for items like office rent (for Class Members
who occupied offices instead of cubicles), marketing assistants (for Class Members
who decided to use an assistant to help with clerical and marketing work), liability
insurance, office supplies, and marketing materials. Thus, sufficient commonality
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exists for purposes of settlement. Plaintiffs do not seek class certification for
settlement purposes with respect to Non-Deduction Claimants or collective action
certification with respect to FLSA Opt-In Plaintiffs.
(c) Rule 23(a)(3) – “Typicality”
Rule 23(a)(3) requires that a representative plaintiff’s claims be “typical” of those
of other class members. FED. R CIV. P. 23. As the Third Circuit has stated, “the
named plaintiffs’ claims must merely be ‘typical, in common-sense terms, of the
class, thus suggesting that the incentives of the plaintiffs are aligned with those of
the class.’” In re Schering Plough Corp. ERISA Litig., 589 F.3d 585, 598 (3d Cir.
2009) (citations omitted). “In instances wherein it is alleged that the defendants
engaged in a common scheme relative to all members of the class, there is a strong
presumption that the claims of the representative parties will be typical of the
absent class members.” In re Merck & Co., Inc., Vytorin/Zetia Sec. Litig., No. 08-
cv-2177, 2012 WL 4482041, at *4 (D.N.J. Sept. 25, 2012) (citation omitted). Here,
the Named Plaintiffs’ claims, and those of the settlement classes, arose from a
common course of conduct by Prudential: an alleged pattern and practice of
making improper payroll deductions, violating state wage and hour or wage
payment laws. Thus, their claims are typical of all Settlement Class Members for
purposes of settlement.
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(d) Rule 23(a)(4) – “Adequacy”
The final prong of Rule 23(a) requires that “the representative parties will
fairly and adequately protect the interests of the class.” FED. R CIV. P. 23. In the
Third Circuit, adequacy is met when the plaintiff has no interests antagonistic to
those of the class and plaintiffs’ counsel is qualified, experienced and generally
able to conduct the proposed litigation. See In re Schering Plough, 589 F.3d at 602.
Here, the core analysis for the first element is whether Plaintiffs have interests
antagonistic to those of the Settlement Class. The second element analyzes the
capabilities and performance of Class Counsel under Rule 23(a)(4) based upon
factors set forth in Rule 23(g). See Sheinberg v. Sorensen, 606 F.3d 130, 132 (3d
Cir. 2010). As discussed below, adequacy is readily met, and Plaintiffs satisfy both
criteria.
First, Plaintiffs have no interests adverse or “antagonistic” to absent Class
Members. Plaintiffs have demonstrated their allegiance and commitment to this
Action by consulting with Class Counsel, reviewing the pleadings, responding to
discovery propounded by Prudential and/or sitting for depositions for almost a
decade, and in the case of Plaintiff Bouder for more than 11 years. Put simply,
Plaintiffs’ interests are aligned with the interests of the absent Class Members.
Second, as discussed in Plaintiffs’ prior certification motions, Class Counsel
are qualified, experienced, and competent in complex litigation, and have an
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established, successful track record in class action litigation. As such, the adequacy
requirement is satisfied.
2. The Settlement Class Satisfies Rule 23(b)(3)
Pursuant to Rule 23(b)(3), a class action may be maintained if “the court
finds that the questions of law or fact common to members of the class
predominate over any question affecting only individual members, and that a class
action is superior to other available methods for the fair and efficient adjudication
of the controversy.” FED. R. CIV. P. 23(b)(3). Plaintiffs readily satisfy Rule
23(b)(3)’s requirements.
(a) Common Questions of Law and Fact Predominate Over Questions Affecting Only Individual Members of the Settlement Class
The Rule 23(b)(3) “predominance requirement ‘tests whether proposed
classes are sufficiently cohesive to warrant adjudication by representation.’”
Marcus v. BMW of N. Am., 687 F.3d 583, 600 (3d Cir. 2012) (quoting Amchem
Prods. v. Windsor, 521 U.S. 591, 623 (1997)). “Issues common to the class must
predominate over individual issues…” In re Hydrogen Peroxide Antitrust Litig.,
552 F.3d 305, 311 (3d Cir. 2008) (quoting Prudential II, 148 F3d at 313-14). Rule
23(b)(3) “does not require identical claims or facts among class members.”
Marcus, 687 F.3d at 597 (citations omitted).
The Class Members here satisfy the predominance test. Though the Class
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Members’ individual claims may differ slightly in terms of precise job title,
number of work weeks, or the states in which they worked, several key issues
predominate all of their claims or the claims of members within each subclass. To
start, all settlement Class Members shared similar responsibilities – selling
Prudential’s insurance products. In the Deduction Classes, the Plaintiffs assert that
Prudential made improper deductions from earnings for office-related expenses.
Thus, for settlement purposes only, common issues among Class Members
predominate so as to warrant representative adjudication here. Should the
settlement classes not be certified and the litigation resumed, however, Prudential
preserves all of its defenses as to the inability of Plaintiffs’ to achieve or maintain
class certification, or other defenses, including inter alia timeliness and statute of
limitation defenses, as further stated in the Settlement Agreement.
(b) A Class Action is the Superior Means to Adjudicate Claims at Issue for Settlement Purposes
Certification of the settlement classes under Rule 23 is “superior to other
available methods for the fair and efficient adjudication of the controversy.” FED.
R CIV. P. 23(b). The claims at issue here are such that class relief is the only
realistic alternative to no relief at all for the vast majority of class members. See In
re Prudential Ins. Co. of Am. Sales Practices Litig., 962 F. Supp. 450, 522-23 (D.
N.J. 1997) (“Prudential I”). Certification of the proposed settlement classes
permits class-wide adjudication of claims of similarly situated claimants when
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individual prosecution would not be cost-effective. Indeed, the class action
mechanism for settlement is meant to afford remedies to claimants who cannot
otherwise prosecute their claims in a cost-effective manner. See Gen. Tel. Co. of
the Sw. v. Falcon, 457 U.S. 147, 155 (1982); Deposit Guar. Nat’l Bank v. Roper,
445 U.S. 326, 339 (1980). New Jersey district courts recognize the efficacy and
superiority of resolving both FLSA collective actions and related wage and hour
state law claims via class action when, as here, the class members’ roles and
responsibilities are similar. See, e.g., Rivet v. Office Depot, Inc., 207 F. Supp. 3d
417, 432 (D.N.J. 2016).
Absent class certification, many putative Class Members and Participating
Claimants here would go uncompensated for Prudential’s alleged wrongdoing, or
alternatively, would need to retain counsel to file individual suits. Thus, resolving
the Class Members’ and Participating Claimants’ claims in a single, consolidated
proceeding is far superior to individual adjudication of their claims. Indeed, the
Settlement Agreement provides Class Members and Participating Claimants with
an ability to obtain prompt, predictable, and certain relief, whereas individualized
litigation carries with it great uncertainty, risk, and costs. Further, Prudential does
not oppose Rule 23 certification of the Deductions Class, for settlement purposes
only (the Certified Deductions Class, as the name suggests, has already been
certified), but Prudential reserves its right to assert that certification of some or all
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of the uncertified classes could not be maintained in the litigation proceeded on
multiple grounds.
(c) This Court is An Appropriate Forum for Resolving the Claims in Dispute
It is undisputed that this Court has subject matter jurisdiction over the claims
alleged in the case, and is the appropriate forum for resolution of the Class
Members’ claims. Likewise, it is uncontested that personal jurisdiction extends to
each Class Member and Participating Claimants under the Due Process Clause
because the Class Notices provided in this case were approved by the Court, and
constitutionally sufficient to place each Class Member on notice of their rights.
B. Final Approval of the Settlement is Warranted Here
1. The Proposed Settlement Meets the Standards for Judicial Approval
Federal Rule of Civil Procedure 23(e) mandates that a class action cannot be
settled without court approval. “Under Rule 23(e), the District Court acts as a
fiduciary guarding the rights of absent class members and must determine whether
a class action settlement is fair, reasonable and adequate.” In re Cendant Corp.
Litig., 264 F.3d 201, 231 (3d Cir. 2001) (“Cendant”) (internal citation and
quotation omitted); see also In re Datatec Sys., Inc. Sec. Litig., No. 04-cv-525,
2007 WL 4225828, at *2 (D.N.J. Nov. 28, 2007) (citing Cendant, 264 F.3d at 231).
Indeed, this Court previously granted preliminary approval of the settlement,
signifying preliminarily that the Settlement was reasonable. See Preliminary
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Approval Order. Now that notice of the proposed Settlement has been provided to
all Class Members, the Court may fully consider final approval.
2. The Proposed Settlement is Fair, Reasonable, and Adequate
As discussed below, the terms of the Settlement are favorable to the Class,
and all Participating Claimants particularly in light of the risk of continued
litigation. Thus, in addition to deciding that the settlement classes satisfy the
requirements of FED. R. CIV. P. 23(a) and (b)(3), the Court should separately
conclude that the proposed Settlement is “fair, reasonable, and adequate.”
Prudential II, 148 F. 3d at 316 (citation omitted).
(a) A Presumption of Fairness Exists
A presumption of fairness exists here because the proposed Settlement is the
product of arm’s-length negotiations conducted by experienced counsel with the
assistance of a qualified mediator, during two separate day-long mediation
sessions, following eleven highly contested years of litigation, including multiple
years of discovery and extensive motion practice. See, e.g., In re Processed Egg
Prods. Antitrust Litig., 284 F.R.D. 249, 267 (E.D. Pa. 2012); see also Warfarin,
391 F.3d at 535; In re Gen. Motors Corp. Pick-up Truck Fuel Tank Prods. Liab.
Litig., 55 F.3d 768, 787-88 (3d Cir. 1995) (“GM Trucks”).
(b) The Girsh Factors Support the Settlement
The Third Circuit has identified nine factors – the Girsh factors – that a
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district court should consider when determining whether a proposed class action
settlement warrants approval, all of which are satisfied here:
(1) the complexity, expense, and likely duration of the litigation; (2) the reaction of the class to the settlement; (3) the stage of the proceedings and the amount of discovery completed; (4) the risks of establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining the class action through the trial; (7) the ability of the defendants to withstand a greater judgment; (8) the range of reasonableness of the settlement fund in light of the best possible recovery; (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation.
See In re Datatec Sys., 2007 WL 4225828, at *2 (citing Girsh v. Jepson, 521 F.2d
153, 157 (3d Cir. 1975)); see also In re Rite Aid Corp. Sec. Litig., 396 F.3d 294,
301 (3d Cir. 2005).11 The Settlement before this Court is reasonable, taking all
11 The Girsh factors are not exhaustive, however, and the Third Circuit has
advised that the district court may consider other relevant factors in determining whether final approval should be granted. See In re AT&T Corp., 455 F.3d 160, 165 (3d Cir. 2006) (internal citation omitted). These may include, e.g.:
[T]he majority of the underlying substantive issues, as measured by the experience in adjudicating individual actions, the development of scientific knowledge, the extent of discovery on the merits, and other factors that bear on the ability to assess the probable outcome of a trial on the merits of liability and individual damages; the existence and probable outcome of claims by other classes and subclasses; the comparison between the results achieved by the settlement for individual class or subclass members, and the results achieved – or likely to be achieved – for other claimants; whether class or subclass members are accorded the right to opt out of the settlement; whether any provisions for attorneys’ fees are reasonable; and whether the procedure for processing individual claims under the settlement is fair and reasonable.
Id. Here, the Settlement equally favors approval under these additional factors.
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relevant factors into consideration. Thus, final approval of the Settlement should be
granted.
(i) Continued Litigation Would Be Long, Complex, and Expensive
This factor is concerned with assessing the “probable costs, in both time and
money, of continued litigation.” Pro v. Hertz Equip. Rental Corp., No. 06-cv-
3830, 2013 WL 3167736, at *3 (D.N.J. June 20, 2013) (quoting Cendant, 264 F.3d
at 234). Here, if litigation were to proceed, significant expense and delay would
result, which would likely not benefit members of the Settlement Class. The final
road to any trial would be even longer and more contentious than the last 11 years
of hard-fought litigation. Given the prospects for significant additional, contentious
class certification litigation (which will involve the review and analysis of the
changing state of the law following the New Jersey Supreme Court’s Hargrove
decision), dispositive motion practice, a trial on the merits, and probable appeals, a
settlement at this time is beneficial to the Class. Thus, this Girsh factor plainly
weighs in favor of approval of the proposed Settlement.
(ii) The Absence of Objections is Evidence of the Reasonableness of the Settlement
Courts within the Third Circuit have held that the response of the class to
notice of a proposed settlement can be an important factor under the Girsh
paradigm: “The reaction of the class ‘is perhaps the most significant factor to be
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weighed in considering [the settlement’s] adequacy.’” O’Keefe v. Mercedes-Benz
USA, LLC, 214 F.R.D. 266, 294 (E.D. Pa. 2003). When determining the measure of
the class’ reaction to a settlement, the court must look to the number and
“vociferousness of the objectors.” See GM Trucks, 55 F.3d at 812. “A low number
of objectors and opt-outs is an indication of the fairness of a settlement.” Gates v.
Rohm & Haas Co., No. 06-cv-1743, 2008 WL 4078456, at *4 (E.D. Pa. Aug. 22,
2008) (citing Warfarin, 391 F.3d at 536).
The Claims Administrator mailed 12,311 Class Notices to Notice Recipients,
consistent with the Court’s directive in the Preliminary Approval Order. There
have been zero objections to the Settlement to date, and just three Notice
Recipients have submitted requests to opt out. “Case law in the Circuit holds that a
small number of objections are strong evidence that the settlement is fair and
reasonable.” See Careccio v. BMW of N. Am., LLC, No. 08-cv-2619, 2010 WL
1752347, at *4 (D. N.J. Apr. 29, 2010);see also In re Linerboard Antitrust Litig.,
321 F. Supp. 2d 619, 629 (E.D. Pa. 2004) (“This fact strongly militates a finding
that the settlement is fair and reasonable.”). Thus, this Girsh factor strongly favors
final approval of the proposed Settlement, where, as here, there were no objections.
(iii) Stage of the Proceedings and the Amount of Discovery Completed
Pursuant to the third Girsh factor, the Court must consider the “degree of
case development that class counsel have accomplished prior to Settlement,”
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including the type and amount of discovery already undertaken. GM Trucks, 55
F.3d at 813. Through this lens, courts can determine whether counsel had an
adequate appreciation of the merits of the case before negotiating.” Id. Essentially,
the Court must ensure that the Settlement is not the product of a quick and
uninformed decision-making process. Here, as discussed, this factor is
unequivocally satisfied. For instance, the parties extensively briefed and argued
multiple rounds of dispositive and other motions. Class Counsel conducted written,
oral, and document discovery to explore all relevant underlying facts regarding
class certification, certification for the FLSA collective action claim, liability, and
damages. Over the course of the eleven years of litigation, Counsel has exchanged
and reviewed tens of thousands of pages of documents. Class Counsel participated
in approximately two dozen depositions, and worked with experts who produced
complex expert reports. Likewise, Prudential conducted oral and written discovery
of Plaintiffs. “[P]ost-discovery settlements are more likely to reflect the true value
of the claim and be fair,” In re Linerboard, supra, 321 F. Supp. 2d at 630 (quoting
Lazy Oil Co. v. Witco Corp., 166 F.3d 581, 588 (3d Cir. 1999)).
Further, that the Settlement was not reached in undue haste is underscored
by the fact that the Parties ultimately required the use of two full days of mediation
and numerous additional negotiations among counsel over a period of several
months prior to reaching the current Settlement Agreement. Thus, this Girsh factor
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weighs in favor of approval of the proposed Settlement.
(iv) Risks of Establishing Liability and Sustainable Damages
As courts in this Circuit have recognized, the fourth and fifth Girsh factors
are “closely related.” In re Flonase Antitrust Litig., No. 08-cv-3149, 2013 WL
2915606, at *4 (E.D. Pa. June 14, 2013). These inquiries “survey the possible risks
of litigation in order to balance the likelihood of success and the potential damage
award if the case were taken to trial against the benefits of an immediate
settlement.” Prudential II, 148 F.3d at 319; see also Cendant, 264 F.3d at 239
(noting this factor “attempts to measure the expected value of litigating the action
rather than settling it at the current time.”) (quoting GM Trucks, 55 F.3d at 816).
With respect to the fourth factor, in assessing the fairness, reasonableness, and
adequacy of a proposed settlement, the Court should balance the risks of
establishing liability against the benefits afforded by the settlement, and the
immediacy and certainty of an adequate recovery against the risks of continuing
litigation. See Girsh, 521 F.2d at 157.
Here, Class Counsel are highly experienced in the areas of complex
commercial litigation, and understand that the resolution of class certification and
liability issues, trial, and the appeal process are inherently uncertain in terms of
both outcome and duration. Thus, while Plaintiffs, and their counsel, are confident
in their theories of recovery, they are also well aware that prior decisions in this
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case weakened their claims and of the potential benefit an intervening change in
law (see Hargrove, supra) may have in bolstering their claims.12
Therefore, the proposed Settlement is structured in a manner to account for
these ongoing litigation risks to both Plaintiffs and Defendants. In particular,
members of the Certified Deductions Class would receive a pro rata share of the
Net Settlement Amount that represents four times their work weeks because their
claims include deductions claims in states that were certified by the Court in a
litigated and contested class certification motion. Members of the Deductions Class
would receive a pro rata share of the Net Settlement Amount that represents three
times their work weeks because their claims were not certified, although their
deductions claims are of the same general kind as the claims certified by the Court
previously. Further, Non-Deduction Wage Claimants and Opt-In Plaintiffs would
receive a pro rata share of the Net Settlement Amount that represents one times
their work weeks because claims of Non-Deduction Wage Claimants have a
greater risk of not prevailing under applicable state deduction laws, and because
the Opt-In Plaintiffs’ overtime claims under federal law and any overtime claims
of Non-Deduction Wage Claimants are the same type of claims earlier dismissed
12 Similarly, Prudential believes that its defenses would ultimately be
successful both to class certification and to Plaintiffs’ claims on the merits but is also well aware of the inherent uncertainty as to the outcome and the continuing disruption of its business during protracted litigation.
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by the Court on Prudential’s motion for summary judgment on the FLSA claims of
the Named Plaintiffs.
(v) Risk of Maintaining the Class Action through Trial
“The value of a class action depends largely on the certification of the class
because, not only does the aggregation of the claims enlarge the value of the suit,
but often the combination of the individual cases also pools litigation resources and
may facilitate proof on the merits.” GM Trucks, 55 F.3d at 817. “Thus, the
prospects for obtaining certification have a great impact on the range of recovery
one can expect to reap from the action.” Id. Here, Plaintiffs face the risk that the
Court could perceive insurmountable difficulties in managing this case as a class
action at trial, or otherwise be persuaded not to grant class certification in some or
all the remaining classes under Rule 23(a) and 23(b).13 Further, Prudential could
seek an appeal under Rule 23(f) of any further class certification decisions (e.g., as
to the Deduction Classes). Such challenges would prolong this Action, increase the
costs of adjudication, and further burden the Court. Thus, this Girsh factor favors
Settlement approval.
13 See, e.g., Rapp v. Green Tree Servicing, LLC, 302 F.R.D. 505 (D. Minn. 2014); Gooden v. Suntrust Mortg., No. 11-cv-2595, 2013 WL 6499250 (E.D. Cal. Dec. 11, 2013); Gustafson v. BAC Home Loans Servicing, LP, 294 F.R.D. 529 (C.D. Cal. 2013); Gordon v. Chase Home Fin., LLC, No. 11-cv-2001, 2013 WL 436445 (M.D. Fla. Feb. 5, 2013); and Kunzelmann v. Wells Fargo Bank, N.A., No. 11-cv-81373, 2013 WL 139913 (S.D. Fla. Jan. 10, 2013).
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(vi) Ability of the Defendants to Withstand Greater Judgment
The seventh Girsh factor considers “whether the defendants could withstand
a judgment for an amount significantly greater than the [s]ettlement.” Warfarin,
391 F.3d at 537-38 (citation omitted). While recognizing that, “in any class action
against a large corporation, the defendant entity is likely to be able to withstand a
more substantial judgment,” Third Circuit precedent makes clear that “against the
weight of the remaining factors, this fact alone does not undermine the
reasonableness of [a particular] instant settlement.” Sullivan v. DB Invs., Inc., 667
F.3d 273, 323 (3d Cir. 2011). Thus, it is often the case that “any ability of [a
defendant] to withstand a greater judgment is outweighed by the risk that Plaintiffs
would not be able to achieve a greater recovery at trial.” In re Philips/Magnavox
Television Litig., No. 09-cv-3072, 2012 WL 1677244, at *13 (D.N.J. May 14,
2012). Here, it is unclear that Plaintiffs would be able to achieve a greater recovery
at trial. There are significant risks for Plaintiffs if they were to proceed, including
that the Court might decline to certify class actions for the Deduction Classes, and
the Non-Deduction Wage Claimants, and may decertify the conditionally certified
collective action and/or dismiss the FLSA overtime claims of the Opt-In Plaintiffs.
Thus, this factor is arguably neutral to the present proceeding, and therefore
supports approval of the proposed Settlement.
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(vii) Range of Reasonableness of the Settlement Fund in Light of the Best Possible Recovery and Attendant Risks of Litigation
“According to Girsh, courts approving settlements should determine a range
of reasonable settlements in light of the best possible recovery (the eighth Girsh
factor) and a range in light of all the attendant risks of litigation (the ninth factor).”
GM Trucks, 55 F.3d at 806. “The factors test two sides of the same coin:
reasonableness in light of the best possible recovery and reasonableness in light of
the risks the parties would face if the case went to trial.” Warfarin, 391 F.3d at
538 (citing Prudential II, 148 F.3d at 322); see also Flonase, 2013 WL 2915606, at
*5 (same). As the Third Circuit explained, the Court must “guard against
demanding too large a settlement based on its view of the merits of the litigation;
after all, settlement is a compromise, a yielding of the highest hopes in exchange
for certainty and resolution.” GM Trucks, 55 F.3d at 806; Sullivan, 667 F.3d at
324 (same). The Third Circuit, however, has recognized that applying this factor
doesn’t require district courts to reduce their analyses to a concrete formula,
particularly when ascertaining the “best possible recovery for the class in the
aggregate would be exceedingly speculative.” Prudential II, 148 F.3d at 322.
Establishing the “best possible recovery” is also “unnecessary” when “the
reasonableness of the settlement could be fairly judged.” Id.
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Here, Prudential produced certain damages information relevant for the
deduction claims currently asserted by the Certified Deductions Classes, which
supports Plaintiffs’ claims for unlawful deductions for liability insurance,
marketing assistants, and office rent, and supports basic damages of approximately
$2.2 million, assuming Plaintiffs were to prevail on all the related claims. This
figure, however, does not include liquidated damages, interest, attorneys’ fees,
waiting time penalties, and other costs to which the Class may be entitled under
various applicable state laws. Plaintiffs estimate from data relating to damages
resulting from alleged illegal deductions obtained from Prudential that the actual
amount of damages may exceed the $12 million settlement amount by
approximately two to four times, although these estimates are contested by
Prudential. As part of the proposed Settlement, the Parties are also resolving
Participating Claimants overtime claims and the FLSA claims of Opt-In Plaintiffs
who become Participating Claimants.14 Because the federal and state overtime
claims were previously dismissed by the Court, Plaintiffs’ counsel places little
weight on the potential amount of a recovery regarding overtime claims.
14 As discussed supra, Judge Cavanaugh previously granted summary judgment
against Plaintiffs’ FLSA claims, but, absent this settlement, this decision would remain subject to appeal. And, though the claims may now be substantially discounted, they have value as part of this settlement.
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Finally, Plaintiffs’ believe their claims are likely enhanced as a result of the
change in controlling law under Hargrove. Thus, certification of an additional class
for Statutory Agents in New Jersey alone could significantly enlarge the classes’
overall size; but there is no guarantee that Plaintiffs could achieve class
certification under the ABC test, or ultimately satisfy the ABC criteria, even in the
event the uncertified classes were certified.
Accordingly, the Parties’ $12.5 million global settlement of the claims is fair
and reasonable, and is consistent with the possible range of outcomes given
Plaintiffs’ best possible recovery, and the risks the Parties would face if the case
continued through trial. Importantly, even in situations where “the fact that a
proposed settlement may amount to a fraction of the best possible recovery [that]
does not, without more, mean that the proposed settlement is inadequate.” In re
Linerboard Antitrust Litig., 321 F. Supp. 2d 619, 632 (E.D. Pa. 2004) (citing City
of Detroit v. Grinnell Corp., 495 F.2d 448, 455 (2d Cir. 1974)).15
15 Indeed, in In re Linerboard Antitrust Litigation, the court identified numerous
cases, including within this Circuit, which settled for a fraction of their proposed damages and were approved. See In re Linerboard Antitrust Litig., 321 F. Supp. 2d at 623 (collecting cases); see, e.g., Lazy Oil, 95 F. Supp. 2d at 339 (court approved settlement amounting to 5.35% of damages for the entire class period and 25.5% of the damages falling within the limitations period); Erie Forge & Steel, Inc. v. Cyprus Minerals Co., No. 94-cv-404, 1994 WL 485803 (W.D. Pa. June 7, 1994) (approving settlement in the appropriate amount of 12.7% to 15.3% of the estimated $2 billion minimum possible trebled recovery).
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Simply put, were the proposed Settlement not approved, continued litigation
would be even longer, more complex, expensive, and fraught with additional risks.
Thus, the final two Girsh factors also favor approval of the proposed Settlement.
V. CONCLUSION
For the foregoing reasons, Plaintiffs respectfully request that the Court grant
their Unopposed Motion for Final Settlement Approval, and enter the proposed
Final Order and Judgment, which inter alia: (1) grants final approval of the
Settlement as fair, reasonable, adequate, and in the best interests of the Class
Members; (2) grants final certification of the Deductions Classes for settlement
purposes only; (3) appoints the Named Plaintiffs as Class Representatives; (4)
permits disbursement of the settlement funds in accordance with the Settlement
Agreement; and (5) dismisses the action with prejudice upon entry of the District
Court’s Final Approval Order.
s/ Kenneth K. Lehn Dated: November 30, 2017 Kenneth K. Lehn
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LOVELL STEWART HALEBIAN JACOBSON LLP John Halebian (pro hac vice) [email protected] Adam C. Mayes (pro hac vice) [email protected] Midtown Office 420 Lexington Ave., Suite 2440 New York, NY 10170 Tel: (212) 500-5010 Fax: (212) 208-6806 Lead Counsel for Plaintiffs
WINNE, BANTA, BASRALIAN & KAHN, P.C. Kenneth K. Lehn (KL 9520) [email protected] Court Plaza South, 21 Main Street Hackensack, NJ 07601 Tel: (201) 487-3800 Fax: (201) 487-8529 Liaison Counsel for Plaintiffs
JERRY K. CIMMET Attorney at Law [email protected] (NJ Attorney ID 203841960) 177 Bovet Road, Suite 600 San Mateo, CA 94402 Telephone: (650) 866-4700 Cell: (650) 619-1301
JOHN M. KELSON LAW OFFICES OF JOHN M. KELSON [email protected] 483 Ninth Street, Suite 200 Oakland, CA 94607 Telephone: (510) 465-1326 Facsimile: (510) 465-0871
KESSLER TOPAZ MELTZER & CHECK, LLP Peter A. Muhic [email protected] Monique Myatt Galloway [email protected] 280 King of Prussia Road Radnor, PA 19087 Telephone: (610) 667-7706 Facsimile: (610) 667-7056
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CERTIFICATE OF SERVICE
I hereby certify that on the 30th day of November, 2017, a true and correct
copy of the foregoing document was electronically filed with the Clerk of the
Court, is available for viewing and downloading from the ECF system, and will be
served by operation of the Court’s electronic filing system (CM/ECF) upon all
counsel of record.
s/ Kenneth K. Lehn Dated: November 30, 2017 Kenneth K. Lehn
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