UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW … · 42621948v.1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY JEFFREY BOUDER, et al., on behalf of themselves,

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]

Case 2:06-cv-04359-CCC-MF Document 367 Filed 11/30/17 Page 1 of 54 PageID: 18119

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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


iv 42621948v.1

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


42621948v.1 vi

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,


42621948v.1 17

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


42621948v.1 18

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.


42621948v.1 19

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.


42621948v.1 20

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),


42621948v.1 21

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


42621948v.1 22

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).


42621948v.1 23

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.


42621948v.1 24

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.


42621948v.1 25

(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


42621948v.1 26

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.


42621948v.1 27

(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


42621948v.1 28

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


42621948v.1 29

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


42621948v.1 30

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


42621948v.1 31

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


42621948v.1 32

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


42621948v.1 33

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.


42621948v.1 34

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


42621948v.1 35

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,”


42621948v.1 36

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


42621948v.1 37

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


42621948v.1 38

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.


42621948v.1 39

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).


42621948v.1 40

(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.


42621948v.1 41

(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.


42621948v.1 42

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.


42621948v.1 43

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).


42621948v.1 44

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


42621948v.1 45

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


42621948v.1

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


Documents

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW … · 42621948v.1 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY JEFFREY BOUDER, et al., on behalf of themselves,