Sixth Circuit declines to call off class action settlement over wage law allegations

By Erianne Leatherman | Jan 24, 2017

CINCINNATI (Legal Newsline) – The U.S. Court of Appeals for the Sixth Circuit has declined to dissolve a class action settlement regarding alleged violations of the Kentucky Wage and Hour Act.

Plaintiffs William Whitlock, David Skyrm, James Middleton and Kristin Moore, who were former employees of Fourth Street Live, an entertainment area located in downtown Louisville, filed a suit in Kentucky state court in 2010 against the defendants FSL Management LLC, Entertainment Concepts Investors LLC and Cordish Operating Ventures, LLC alleging “violations of the Kentucky Wage and Hour Act, KRS § 337.385 for their policies regarding off-the-clock work and mandatory tip-pooling,” court documents said.

The plaintiffs’ class certification motion was granted by the court, then the defendants requested interlocutory appellate review. This review was denied, along with their motion to reconsider. After that, settlement discussions took place and the parties eventually reached agreement on the financial terms.

About a year later, the parties finally agreed on the non-monetary terms and the parties filed a joint status report informing the court that they settled and that formal settlement documents would soon follow, Jeremy Gilman, partner at Benesch Law, said in a blog post.

Gilman said the defendants then moved the district court to decertify the class centered on the intervening Kentucky appellate decision, which was then subject to a request for discretionary review at the Kentucky Supreme Court. The district court then ruled to not decertify the lawsuit.

The Sixth Circuit said in court documents that the lower court found that “regardless of the present meaning of” the Kentucky Wage and Hour Act, it was “bound to maintain class certification and enforce the settlement agreement as a binding contract under Kentucky law.” The defendants then appealed to the Sixth Circuit.

“The appellants have failed to make any argument explaining why the prohibition against class-action litigation in KRS § 337.385(2) disturbs any of the class-certification requirements set forth in Rule 23(a) or (b),” court documents said. “In fact, the appellants seem to hope that this court will fill in the gaps on their behalf.”

“Essentially, the court declined to undo a settlement to which defendants had voluntarily agreed,” Gilman told Legal Newsline.

The court of appeals affirmed and “conclude[d] that a post-settlement change in the law does not alter the binding nature of the parties’ settlement agreement, nor does it violate Rule 23 of the Federal Rules of Civil Procedure or the Rules Enabling Act,” court documents said.

“Defendants may [now] seek panel hearing and en banc review of the decision at the 6th Circuit and, if unsuccessful, review by the United States Supreme Court,” Gilman said.

“The Sixth Circuit’s decision seems to have been impacted by timing factors: the intervening Kentucky appellate decision upon which defendants based their decertification motion was rendered three weeks before the parties informed the trial court that they had agreed to settle the case,” Gilman said.

“It remains for speculation whether the outcome would have differed had the Kentucky court issued its ruling three weeks after they had agreed to settle.”

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