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FILED: SUFFOLK COUNTY CLERK 02/26/2016 03:37 PM INDEX NO. 063363/2014
NYSCEF DOC. NO. 36 RECEIVED NYSCEF: 02/26/2016
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF SUFFOLK
KRYSTAL SHEPPARD and DOMINIQUE RUIZ,
individually and on behalf of all other persons similarly
situated, Index No.: 63363/2014
Plaintiffs,
-against-
BK VENTURE GROUP LTD. d/b/a STARLETS, KEVIN
BURCH, JOSEPH JOHNSON, and/or other entities
affiliated with or controlled by BK VENTURE GROUP
LTD., KEVIN BURCH or JOSEPH JOHNSON,
Defendants.
MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFFS’ UNOPPOSED MOTION
FOR PRELIMINARY APPROVAL OF SETTLEMENT
LEEDS BROWN LAW, P.C.
Jeffrey K. Brown
Michael A. Tompkins
Brett Cohen JOHN BREEN, ESQ.
Laura Reznick John Breen
1 Old Country Road, Suite 347 1355 Motor Pkwy, Suite 2
Carle Place, New York 11514 Hauppauge, NY 11749
Attorneys for Plaintiffs and Proposed Class Of Counsel to Leeds Brown Law, P.C.
TABLE OF CONTENTS
Preliminary Statement.............................................................................................................1
Statement of Fact .....................................................................................................................2
Argument ..................................................................................................................................3
Point I: The Court Should Utilize the Two-Step Process for Approving the Settlement .......3
Point II: The Proposed Settlement Agreement Provides
Probable Cause for Preliminary Approval ...............................................................5
A. The Settlement is Fair and Reasonable ........................................................5
1. Procedural Fairness: The Settlement Should be Granted
the Presumption of Fairness ...................................................................6
2. Substantive Fairness: The Agreement is Substantively Fair and
Reasonable .............................................................................................9
B. Courts Routinely Approval Similar Settlements........................................13
Point III: Class Certification Should be Granted..................................................................13
A. Plaintiffs Have Satisfied the Elements of CPLR § 901 .............................15
B. Section 902 Factors Support Class Certification .......................................25
Conclusion ..............................................................................................................................26
Plaintiffs submit this memorandum of law in support of their unopposed motion for
preliminary approval of the proposed settlement pursuant to CPLR §§ 901, 902, 904 and 908,
certification of the proposed class, appointment of class counsel, authorization to distribute the
proposed notice of settlement to the class, authority to amend the complaint to reflect the new
caption, and approval of the class action settlement procedures.
PRELIMINARY STATEMENT
This action for unpaid wages and gratuities is brought on behalf of the Named Plaintiffs
KRYSTAL SHEPPARD and DOMINIQUE RUIZ (the “Named Plaintiffs”), and a putative class
of individuals (collectively “Plaintiffs” or “Class” and “Class Members”) who performed services
for Defendants BK VENTURE GROUP LTD. d/b/a STARLETS; KB VENTURE GROUP, LLC
d/b/a LOVE AND LUST; KEVIN BURCH (the “Starlets Defendants”); and/or any other entities
affiliated with or controlled by BK VENTURE GROUP LTD. d/b/a STARLETS; KB VENTURE
GROUP, LLC d/b/a CLUB LOVE AND CLUB LUST; KEVIN BURCH (collectively
“Defendants”) between May 1, 2008 and the date of the Preliminary Approval Order, in one or
more of the following classifications: dancer, entertainer, adult performer, or in other related job
classifications at Defendants’ adult entertainment establishment commonly known as Starlets,
Club Love, and/or Club Lust (hereinafter, “Starlets”).
Plaintiffs respectfully request that this Court (1) preliminarily approve the proposed
Settlement Agreement and Release (“Agreement”) annexed to the Affirmation of Michael A.
Tompkins (“Tompkins Aff.”) 1 as Exhibit A at § 1.32, (2) certify the proposed Class, (3) appoint
Leeds Brown Law, P.C. as Class Counsel, (4) authorize distribution of the proposed Notice of
1
Unless otherwise indicated, all exhibits are attached to the Tompkins Aff.
1
Settlement and claim form, (5) approve the class action settlement procedures including the
implementing dates, (6) approve the amended complaint, and (7) grant any other relief this Court
deems proper. Defendants do not oppose this motion.
Similar settlements have been approved by courts in New York for approval related to the
similar factual scenarios and agreements like this one. See e.g., In re Penthouse Exec. Club Comp.
Litig., 2013 U.S. Dist. LEXIS 63065 (S.D.N.Y. Apr. 29, 2013). As set forth below, the proposed
Agreement (“Settlement” or “Agreement”) is substantively fair and reasonable and was reached
through arm’s-length negotiations between experienced counsel. Plaintiffs have satisfied all
elements of §§ 901 and 902 of the CPLR for class certification, and certifying this case is an
efficient method of resolving this dispute. Further, the requirements of §§ 904 and 908 necessitate
the sending of court-authorized notice to Class Members before a Fairness Hearing can be held
and final approval of the Settlement can be granted. Accordingly, Plaintiffs request that this
unopposed motion be granted.
STATEMENT OF FACTS
As alleged in the complaint, Defendants employed Plaintiffs and other similarly situated
workers as dancers, entertainers and adult performers at Defendants’ adult entertainment facilities,
including those commonly known as Starlets, Club Love and/or Club Lust. As alleged in Plaintiffs’
Complaint and supported by Plaintiff Ruiz’s affidavit, the Named Plaintiffs allege that they, along
with other dancers and entertainers, were subject to Defendants’ unlawful policy of failing to remit
wages and gratuities to Plaintiffs as required under Labor Law and its implementing regulations.
See Exhibit B (“Ruiz Aff.”). According to Plaintiffs’ Complaint: (1) Starlets did not pay its
dancers/entertainers any hourly wage and only paid them some portion of the tips they received
from the customers; (2) dancers/entertainers did not receive all of the charges that a customer
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would pay for the dancer/entertainer’s services; (3) dancers/entertainers were subject to fines, fees,
and deductions from their rightfully owed wages; and (4) dancers/entertainers at all of Defendants’
establishments were subject to the same policies and procedures. See Class Action Complaint,
NYSCEF Index No. 63363/2014, Dkt. No. 2. 2
ARGUMENT
POINT I:
THE COURT SHOULD UTILIZE THE TWO-STEP PROCESS
FOR APPROVING THE SETTLEMENT
CPLR § 908 states that “A class action shall not be dismissed, discontinued, or
compromised without the approval of the court. Notice of the proposed dismissal, discontinuance,
or compromise shall be given to all members of the class in such manner as the court directs.”
Courts in New York typically consider a two-tier approach to reviewing the fairness and
reasonableness of a settlement agreement in the class-action context: (1) preliminary approval of
settlement and distribution of notice; and (2) scheduling a fairness hearing and consideration of
final approval of the settlement based on an application with supporting materials. See e.g., In re
Penthouse Exec. Club Comp. Litig., 2014 U.S. Dist. LEXIS 5864 (S.D.N.Y. Jan. 14, 2014) (Judge
Kimba M. Wood granting final approval of the settlement after the distribution notice to class
members and the holding of a fairness hearing); see also, Bartley v. 335 Alpha, Inc., Index No.
04855/2013 (Sup. Ct. Suffolk Cty. Nov. 5, 2014) (Judge William B. Rebolini granting final
approval after a fairness hearing and notice to all class members who performed services and
earned gratuities); Veselovsky v. Meadow Club Caterers, Index No. 10433/2013 (Sup. Ct. Suffolk
Cty. Oct. 19, 2015) (Judge Daniel Martin, same); Kreskowski, v. DBD Caterers Inc., d/b/a The
2
Unless otherwise indicated, all references to NYSCEF Documents, including “Doc. No.” refer
to those under the Index Number in the instant case.
3
Vineyards, Index No. 09506/2013 (Sup. Ct. Suffolk Cty. Jan. 20, 2015) (Judge W. Gerard Asher,
same); Chhab v. Montclair Hotels GCNY, LLC, Index No. 2358/2012 (Sup. Ct. Nassau Cty., July
11, 2015) (Judge Denise Sher granting final approval after the distribution of notice to all class
members who worked as service employees at defendants’ facility and the holding of a fairness
hearing); Parada v. Westbury Manor Enter., Inc., Index No. 601125/2011 (Sup. Ct. Nassau Cty.
Feb. 20, 2014) (Judge Vito DeStefano granting preliminary approval and authorizing distribution
of notice, then conducting a fairness hearing as to the nature of the terms and conditions of the
agreement); Chavarria v. Crest Hollow Country Club, Index No. 017464/2011 (Sup. Ct. Nassau
Cty. Dec. 17, 2013) (Judge DeStefano granting final approval after the two-stage approach);
Toledo v. DCJ Catering Corp., Index No. 600994/2011 (Sup. Ct. Nassau Cty. Dec. 21, 2012)
(Judge Timothy Driscoll, same).
First, at the preliminary approval stage, courts (i) review the proposed settlement, (ii)
define the scope of the class, (iii) approve the distribution of notice to the class, (iv) grant class
counsel status, and (v) set a schedule for deadlines including the date of the fairness hearing. See,
e.g., Parada, (preliminarily approving class-wide settlement, allowing for distribution of notice,
and scheduling a fairness hearing before granting final approval). Preliminary approval “requires
only an ‘initial evaluation’ of the fairness of the proposed settlement on the basis of written
submissions and, in some cases, an informal presentation by the settling parties.” Penthouse, 2013
U.S. Dist. LEXIS 63065, at *6 (internal quotations omitted).
Upon preliminary approval being granted, notice is distributed to class members advising
them of their ability to participate, object, or opt out of the settlement – or else they are bound by
its terms. Class members are also provided with the date of the fairness hearing should they choose
to object, attend, or be heard. See generally McReynolds v. Richards-Cantave, 588 F.3d 790, 803
4
(2d Cir. 2009); see also Penthouse, 2013 U.S. Dist. LEXIS 63065 at *5.
At the second stage and after the notice has been distributed to the class, courts can evaluate
the settlement with the benefit of the class members’ input, including objections. McReynolds,
588 F.3d at 803; see also Penthouse, 2013 U.S. Dist. LEXIS 63065 at *5. Courts also have a full
opportunity to evaluate the proposed settlement, the participation and interest level from class
members, the risks related to continuing litigation, and the overall fairness of the proposed
settlement with the benefit of calculations and evaluations by the parties’ counsel and experts, if
necessary.
POINT II:
THE PROPOSED SETTLEMENT AGREEMENT PROVIDES “PROBABLE CAUSE”
FOR PRELIMINARY APPROVAL
A. The Settlement is Fair and Reasonable
“In reviewing a proposed settlement for preliminary approval, rather than final approval,
the Court need only determine whether the proposed settlement is possibly fair, adequate, and
reasonable.” In re Take Two Interactive Secs. Litig., 2010 U.S. Dist. LEXIS 143837, at *31
(S.D.N.Y. June 29, 2010). Courts grant preliminary approval so long as they find “probable cause
to submit the [settlement] proposal to class members and hold a full-scale hearing as to its
fairness.” In re Penthouse, 2013 U.S. Dist. LEXIS 63065 at *7 (quoting In re Traffic Exec. Ass’n,
627 F.2d 631, 634 (2d Cir. 1980) (internal citation omitted)).
Preliminary approval of a proposed settlement is considered appropriate where, as here,
the agreement is the result of “serious, informed, and non-collusive negotiations, where there are
no grounds to doubt its fairness and no other obvious deficiencies … and where the settlement
appears to fall within the range of possible approval.” In re Gilat Satellite Networks, Ltd., No. 02
Civ. 1510 (CPS), 2007 U.S. Dist. LEXIS 29062, 2007 WL 1191048, *9 (E.D.N.Y. April 19, 2007);
see also Tart v. Lions Gate Entm’t Corp., No. 14-CV-8004 (AJN), 2015 U.S. Dist. LEXIS 139266,
5
at *13 (S.D.N.Y. Oct. 13, 2015) (preliminary approval should be granted as long as proposed
settlement “appears to fall within the range of possible approval.”) (quoting Clark v. Ecolab, Inc.,
2009 U.S. Dist. LEXIS 108736, at *15 (S.D.N.Y. Nov. 17, 2009)) (internal quotations omitted);
Slobodan Karic v. Major Auto. Cos., No. 09 CV 5708 (ENV), 2015 U.S. Dist. LEXIS 171730, at
*22 (E.D.N.Y. Dec. 22, 2015) (probable cause exists if the proposed settlement appears to be
“fair, adequate, and reasonable, and not the product of collusion.”) (quoting Joel A. v. Giuliani,
218 F.3d 132, 138 (2d Cir. 2000)).
To determine whether a settlement is possibly fair, adequate, and reasonable, courts
consider “both the negotiating process that led to the settlement and the terms of the agreement
itself.” Take Two Interactive Secs. Litig., 2010 U.S. Dist. LEXIS 143837, at *31.
1. Procedural Fairness: The Settlement Should Be Granted the Presumption of Fairness
On a motion for preliminary approval, procedural fairness is presumed so long as the
proposed agreement is the result of (1) arm’s-length negotiations, (2) among experienced counsel,
(3) after due diligence or discovery. See McReynolds v. Richards-Cantave, 588 F.3d 790, 803 (2d
Cir. 2009); see also Fiala v. Metro. Life Ins. Co., 27 Misc. 3d 599, 607 (Sup. Ct. N.Y. Cty. 2010)
(A “presumption of fairness, adequacy, and reasonableness may attach to a class settlement
reached in arm’s-length negotiations between experienced, capable counsel after meaningful
discovery”) (quoting Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 116 (2d Cir. 2005)
(internal quotations omitted)). The presumption of procedural fairness is even stronger where, as
here, a fourth element is satisfied: (4) the parties engaged a neutral mediator to help facilitate the
settlement and the agreement is endorsed by the mediator. Kelen v. World Fin. Network Nat’l
Bank, 12-CV-5024 (VSB), 2014 U.S. Dist. LEXIS 112079, *22 (S.D.N.Y. July 28, 2014).
Here, all four factors are met.
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i. The Agreement Resulted from Arms-Length Negotiations with the Help of an
Experienced Mediator
As outlined in more detail in the Tompkins Affirmation, this case involves a bona fide
dispute that was litigated in an adversarial manner prior to reaching settlement. The proposed
Agreement was the product of intense negotiations following motion practice and a formal
mediation session facilitated by Mediator Martin Scheinman, between Plaintiffs’ counsel and
Defendants’ counsel – including two firms for Defendants. See Exhibit F, Curriculum Vitae of
Martin F. Scheinman, Esq.; see also Penthouse, 2014 U.S. Dist. LEXIS 5864 at *14-15 (citing the
involvement of experienced mediators – including Mediator Scheinman – as an indication of the
procedural fairness of the proposed settlement).
ii. Plaintiffs Are Represented by Competent, Experienced Counsel
The Named Plaintiffs are represented by Leeds Brown Law, P.C. (“Leeds Brown”), whose
attorneys are experienced in labor and employment law. Leeds Brown has represented numerous
clients in wage and hour settlements under state and federal law, including in the entertainment
industry. See, e.g., Penthouse, 2014 U.S. Dist. LEXIS 5864 at *14-15; Tart v. Lions Gate Entm’t
Corp., 2015 U.S. Dist. LEXIS 139266 at *7 (S.D.N.Y. Oct. 13, 2015). (“Leeds Brown Law, P.C.
[and co-counsel] are experienced and well-qualified employment and class action lawyers with
expertise in prosecuting and settling labor law cases. The substantial work that Plaintiffs’ counsel
has performed in investigating, litigating and reaching a settlement in this case demonstrates their
commitment to the class and representing the class’s interests.”); Garcia v. Exec. Club LLC, No.
10-CV-1545 (SHS), 2012 U.S. Dist. LEXIS 189823, at *6 (S.D.N.Y. May 10, 2012); Veselovsky,
Index No. 10433/2013 (J. Martin); Bartley, Index No. 04855/2013 (J. Rebolini); Gonzalez v.
NHPI, Index No. 12654/2012 (J. Bruno); Orgera v. John Anthonys On The Water Inc., Index No.
10374/2012 (Sup. Ct. Nassau Cty., July 18, 2014) (J. Brown); Chavarria, Index No. 17464/2011
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(Sup. Ct. Nassau Cty., Dec. 13, 2013) (J. DeStefano); Ruiz, Index No. 600317/2010 (J.
DeStefano); Toledo, Index No. 600944/2011; Williams, Index No. 108648/2010 (certifying an
Article 9 class of workers at John F. Kennedy International Airport); Kehn v. Plainview
Hospitality, LLC, Index No. 9866/2012 (Sup. Ct. Nassau Cty., April 8, 2014); Carlin v. Singh
Hospitality Group, Inc., Index No. 14702/2012 (Sup. Ct. Nassau Cty., Dec. 20, 2013); Lopez v.
Bethpage Associates LLC, Index No. 2012/3465 (Sup. Ct. Nassau Cty., Aug. 14, 2013); Macaluso
v. Woodbury Int’l, Inc., Index No. 11/105520 (Sup. Ct. Nassau Cty. Sept 9, 2013).
iii. Class Counsel Engaged in Due Diligence to Ensure that the Settlement is Fair and
Reasonable
Class Counsel has and will continue to engage in due diligence through a review of the
Defendants’ documents, including (to the extent they exist) work schedules, staffing sheets,
revenue documents, bills, invoices, time records, pay/tip records, credit card receipts, ledgers, and
other related documents – electronic or otherwise, as well as corporate and personal tax returns for
the Settlement Period (the “Review Records”). Prior to execution of the proposed Agreement,
Class Counsel conducted a review of the schedules provided by Defendants to ensure that the
settlement allocation formula agreed to at the August 13, 2015 mediation is fair to all class
members. See Tompkins Aff. ¶¶ 29-32. Upon receiving the Class List from Defendants, Class
Counsel will conduct additional due diligence to ensure that all of the settlement is fair including
the allocation formula. See Tompkins Aff. ¶ 39.
While Notice is pending, Class Counsel will retain a certified accountant to perform due
diligence regarding financial representations made by Defendants during the course of the
settlement discussions. Class Counsel and the CPA will review documents and materials from
Defendants to verify Defendants’ representations regarding class size, damage components, and
Defendants’ ability to withstand a greater judgment. See Ex. A, § 3.6.
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2. Substantive Fairness: The Agreement is Substantively Fair and Reasonable
As illustrated above in Point 1, the proposed Agreement is procedurally fair because it
resulted from arm’s-length negotiations between experienced counsel after discovery and due
diligence – and the Agreement builds in a notice process in line with the mandates of CPLR § 904.
Where, as here, a proposed settlement agreement is the result of a fair process, the substantive
fairness of the settlement agreement is generally presumed on a motion for preliminary approval
unless itcontains “obvious defects.” Penthouse, 2013 U.S. Dist. LEXIS 63065 at *7 (probable
cause presumed where McReynolds factors are met and proposed agreement has “no obvious
defects.”); see also Take Two Interactive Secs. Litig., 2010 U.S. Dist. LEXIS 143837, at *31
(settlement that is procedurally fair should be preliminarily approved absent “obvious
deficiencies” such as “unduly preferential treatment of class representatives or of segments of the
class, or excessive compensation for attorneys.”).
i. The Agreement is Substantively Fair for All Class Members
As noted, at the preliminary approval stage, a proposed settlement agreement is presumed
to be substantively fair so long as it contains no obvious defects. It is not necessary for the Court
at this stage to conduct a thorough evaluation of the proposed Agreement. However, it is worth
noting that a more thorough review of the Proposed Agreement would demonstrate that the
agreement is substantively fair to all class members.
The Agreement establishes a Gross Settlement Fund for allocation purposes in the amount
of $1,200,000 for the Settlement Class. See Ex. A § 1.16. Upon final approval by the Court, this
fund will provide members of the Settlement Class their unpaid wages and gratuities for the
relevant period. See generally id. All putative class members who file claim forms are guaranteed
a minimum amount, with additional “points” granted to each putative class member based on an
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estimate of the duration of her employment. The Agreement provides a mechanism for class
members to dispute that estimate. Id. at §§ 3.5(A), 3.5(D).
In addition to the traditional mailing of the Proposed Notice and Claim Forms (see Exhibits
D and E) through a third-party claims administrator, the Agreement provides for dissemination of
other forms of notice, including print, web and social media advertising. See Ex. A §§ 2.4, 2.5.
Additionally, those who worked for Defendants prior to 2013 are guaranteed a minimum amount
and are given a mechanism to increase that amount if they can verify the length of their
employment with Defendants. Id. at § 3.5(B), 3.5(D). The Agreement also sets aside $35,000 in
Reserve Funds for late-filed claims, errors, and omissions from the Class List, with priority given
to class members who worked prior to 2013. Id. at § 3.1(B).
In this case, even a cursory review of the proposed Agreement would reveal that the
Agreement contains no obvious deficiencies. See Ex. A. Under the terms of the Agreement, two
Named Plaintiffs are compensated using the same formula as the putative class members. The
proposed service awards of $7,500 for the Named Plaintiffs are modest compared to service awards
that have been approved in similar cases, and are reasonable to compensate them for their efforts
to secure relief for the class. See, e.g., In re Penthouse Executive Club Litig., 10-CV-1145(KMW)
(approving service awards of $15,000 for each named plaintiff and $8,750 for each opt-in
Plaintiff); Chavarria v. Crest Hollow Country Club at Woodbury Inc., Index No. 17464/2011 (Sup.
Ct. Nassau Cty., Dec. 13, 2013) (J. DeStefano) (approving service awards of a combined $25,000
and $8,333.33 for each Named Plaintiff); Toure v. Amerigroup Corp., No. 10 Civ. 5391, 2012 WL
3240461, at *6 (E.D.N.Y. Aug. 6, 2012) (approving awards of $10,000 for each class
representative); Lovaglio v. W & E Hospitality, Inc., No. 10 Civ. 7351, 2012 WL 2775019, at *4
(S.D.N.Y. July 6, 2012) (approving service awards of $10,000 for each named plaintiff); Sewell
10
v. Bovis Lend Lease, Inc., No. 09-CV-6548, 2012 WL 1320124, at *14-15 (S.D.N.Y. Apr. 16,
2012) (approving service payments of $10,000 and $15,000).
Similarly, the proposed fee award for Class Counsel is well within the range of
reasonableness. See, e.g., deMunecas v. Bold Food, LLC, No. 09 CIV. 00440 DAB, 2010 WL
3322580, at *9-10 (S.D.N.Y. Aug. 23, 2010) (“Class Counsel’s request for 33% of the Fund
[exclusive of costs] is reasonable under the circumstances of this case and is consistent with the
norms of class litigation in this circuit.”); Davis v. J.P. Morgan Chase & Co., Inc., 827 F. Supp.
2d 172, 184-86 (W.D.N.Y. 2011) (awarding one-third of a $42 million settlement in a FLSA and
NYLL case); Willix v. Healthfirst Inc., 2011 U.S. Dist. LEXIS 21102 at *17 (awarding class
counsel one-third of $7,675,000 settlement fund in FLSA and NYLL wage and hour action); Toure
v. Amerigroup Corp., Case No. 10-cv-5391, 2012 U.S. Dist. LEXIS 110300 (E.D.N.Y.
2012) (awarding one-third of $4,450,000 in a wage and hour case); Mohney v. Shelly’s Prime
Steak, Case No. 06-cv-4270, 2009 U.S. Dist. LEXIS 27899 (S.D.N.Y. Mar. 31, 2009) (awarding
33% of $3,265,000 fund in FLSA and NYLL tip misappropriation case). Class Counsels’ fee under
the Agreement is particularly reasonable in light of the fact that the fee award is inclusive of all
costs borne by Class Counsel in pursuing and settling the litigation, including the mediator’s fees
and the cost of notice and payment of the Settlement Claims Administrator’s fees.
ii. The Settlement is Reasonable In Light of the Risks of Continued Litigation
In deciding to recommend the proposed Agreement to Named Plaintiffs and putative class
members, Plaintiffs’ Counsel considered the risks of continued litigation, including the risks of
establishing liability, the difficulty of establishing exact damages, the possibility that Defendants
might succeed on an affirmative defense that would significantly reduce Plaintiffs’ recovery, the
difficulty of locating putative class members, and the risk of being unable to collect on an eventual
11
judgment due to Defendants’ financial difficulties.
While Plaintiffs believe that they could establish liability and damages, ultimate success
was never guaranteed. Plaintiffs would have to overcome numerous litigation hurdles (i.e.
certification of the Class, costly discovery, and potential motions such as summary judgment, and
possible trial) which would likely have taken additional years at significant cost. Defendants
insisted that they would oppose class certification if the case did not settle. Moreover, given the
difficulty of establishing individual damages in light of Defendants’ poor recordkeeping, there was
significant risk as to whether Plaintiffs would be able to achieve a monetary result greater than the
$1,200,000 Gross Settlement Fund created by the Agreement. Because of these obstacles, the
potential recovery at trial may have been significantly less than what was achieved, and the Named
Plaintiffs might not have been able to obtain recovery for similarly situated dancers and
entertainers. Even if Plaintiffs were able to achieve a greater monetary result, Defendants
represented at mediation that they would not be able to withstand a judgment greater than the
settlement amount. Plaintiffs’ counsel will be reviewing relevant financial records to verify these
representations.
In contrast to the uncertainty and risks that are present in continued litigation, this
Settlement produces an immediate significant recovery for Plaintiffs. Immediate recovery is
especially valuable in this case because “[g]iven the itinerant nature of the class, settling now—as
opposed to receiving relief after a final appeal—also increases the chances that class members can
be found.” Hart v. RCI Hosp. Holdings, 2015 U.S. Dist. LEXIS 126934, at *23 (S.D.N.Y. Sep. 22,
2015). (given transient nature of class of dancers and entertainers and benefit of immediate
recovery in a similar case “weigh[ed] heavily in favor of approving the settlement.”).
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B. Courts Routinely Approve Similar Settlements
Courts in New York and around the country have approved similar settlements in similar
cases. E.g. Hart , 2015 U.S. Dist. LEXIS 126934 (approving settlement on behalf of class of adult
entertainers who alleged that Defendants misclassified them as independent contractors and failed
to pay them minimum wage and remit gratuities); In re Penthouse Exec. Club Comp. Litig., 2014
U.S. Dist. LEXIS 5864 (S.D.N.Y. Jan. 14, 2014) (granting final approval of Penthouse settlement);
Flynn v. N.Y. Dolls Gentlemen’s Club, 2014 U.S. Dist. LEXIS 142588 (S.D.N.Y. Oct. 6, 2014)
(granting preliminary approval of similar settlement on behalf of dancers and entertainers); Flynn
v. N.Y. Dolls Gentlemen’s Club, 2015 U.S. Dist. LEXIS 82772 (S.D.N.Y. Apr. 27, 2015) (granting
final approval of Flynn settlement); Diaz v. Scores Holding Co., 2011 U.S. Dist. LEXIS 112187
(S.D.N.Y. July 11, 2011) (granting final approval of settlement on behalf of dancers and
entertainers for similar wage and hour violations); see also Encarnacion v. J.W. Lee, Inc., No. 14-
CIV-61927-DIMITROULEAS, 2015 U.S. Dist. LEXIS 144858 (S.D. Fla. Oct. 22, 2015) (same).
For the reasons articulated herein, Plaintiffs submit that the proposed Agreement is fair and
reasonable and provides this Court adequate probable cause to grant preliminary approval of the
settlement for the purpose of authorizing mailing of notice to the Class and scheduling a fairness
hearing for final approval of the Settlement.
POINT III: CLASS CERTIFICATION SHOULD BE GRANTED
Class certification is routinely granted in wage and hour actions in the State of New York.
See generally Stecko v. RLI Insurance Company, 2014 N.Y. App. Div. LEXIS 7065 (1st Dept.
2014); Williams v. Air Serv Corp., 121 A.D.3d 441, 442 (1st Dept. 2014) (class action “is superior
to the prosecution of individualized claims” in action to recover unpaid wages); Weinstein et al v.
Jenny Craig Operations, Inc., Index No. 11/105520 (“a class action also yields a public benefit
13
which makes it superior to an administrative complaint.”); Nawrocki v. Proto Construction and
Development Corp., 82 A.D.3d 534, 536 (1st Dept. 2011) (“class action is the superior vehicle for
resolving this wage dispute”); Ortiz v. J.P. Jack Corp., 286 A.D.2d 671 (2d Dept. 2001); Pesantez
v. Boyle Environmental Services, Inc., 251 A.D.2d 11, 12 (1st Dept. 1998) (class action is the
“best method of adjudicating” wage and hour disputes); Thomas v. Meyers Assoc., L.P., 39 Misc
3d 1217[A], 1217A, 2013 NY Slip Op 50650[U], *11 (Sup. Ct., N.Y. Cty. 2013) (“there is no
question that a class action is the superior method” to pursue a case for unpaid wages because
“given the relatively small size of each claim, as well as fear of retaliation, many members of the
class would be reluctant and unable to afford to pursue redress of their claims absent class
certification.”).
More specifically, in New York and across the country, class certification is routinely
granted in actions on behalf of dancers and entertainers seeking payment of unpaid wages and
gratuities that were improperly withheld and recoupment of fines by their employers. See, e.g.,
Hart, 2010 U.S. Dist. LEXIS 137129 at *14-23 (granting certification to class of adult entertainers
seeking unpaid wages and gratuities because “the issues in the class action that are subject to
generalized proof, and thus applicable to the class as a whole . . . predominate over those issues
that are subject only to individualized proof.”); Penthouse, 2013 U.S. Dist. LEXIS 63065 at *12-
14 (same); Flynn v. N.Y. Dolls Gentlemen’s Club, 2015 U.S. Dist. LEXIS 82772 (S.D.N.Y. Apr.
27, 2015) (same); Diaz v. Scores Holding Co., 2008 U.S. Dist. LEXIS 38248 (S.D.N.Y. May 9,
2008) (granting conditional class certification of class of bartenders, servers, dancers, and other
tipped employees for unpaid wages and misappropriated tips); see also Espinoza v. Galardi S.
Enters., No. 14-21244-CIV-GOODMAN, 2016 U.S. Dist. LEXIS 2904, at *7 (S.D. Fla. Jan. 11,
14
2016) (noting that every federal court faced with the issue has granted class certification in wage
and hour cases brought by dancers and entertainers against strip clubs and collecting cases).
A. PLAINTIFFS HAVE SATISFIED THE ELEMENTS OF CPLR § 901
1. CPLR § 901 IS TO BE LIBERALLY CONSTRUED
CPLR § 901(a) provides that one or more members of a class may sue as representative
parties on behalf of a class if:
1. the class is so numerous that joinder of all members whether otherwise
required or permitted is impracticable [“numerosity”];
2. there are questions of law or fact common to the class which predominate
over any questions affecting only individual members [“predominance”];
3. the claims or defenses of the representative parties are typical of the
claims or defenses of the class [“typicality”];
4. the representative parties will fairly and adequately protect the interests of
the class [“adequacy”]; and
5. a class action is superior to other available methods for the fair and efficient
adjudication of the controversy [“superiority”].
It is well established that, in deciding whether to certify a class, “a court must be mindful
of [the Appellate Division’s] holding that the class certification statute should be liberally
construed.” Kudinov v. Kel-Tech Const. Inc., 65 A.D.3d 481, 481 (1st Dept. 2009) (citing Englade
v. Harper Collins Publs., Inc., 289 A.D.2d 159, 159 (1st Dept. 2001)); see also Globe Surgical
Supply v. GEICO Ins. Co., 59 A.D.3d 129, 135 (2nd Dept 2008) (“Article 9 of the CPLR is to be
‘liberally construed’”); Gonzalez v. Personal Touch Moving, Inc., 2014 N.Y. Misc. LEXIS 3568,
at *2 [Sup Ct, NY County Apr. 29, 2014, No. 450146/14] (“Article 9 of the CPLR is to be liberally
construed in favor of granting class certification.”); Pruitt v. Rockefeller Center Properties, Inc.,
167 A.D.2d 14, 21 (1st Dept. 1991) (“[a]ppellate courts in this state have repeatedly held that the
class action statute should be liberally construed … any error, if there is to be one, should be ... in
15
favor of allowing the class action”); Galdamez v. Biordi Constr. Corp., 13 Misc. 3d 1224(A) (Sup.
Ct. N.Y. Cty. Oct. 17, 2006), aff’d 855 N.Y.S.2d 104 (1st Dept. 2008).
While, as demonstrated below, the instant action clearly meets the requirements for class
certification, any doubts must be resolved in favor of class certification. Pruitt, 167 A.D.2d at 21
(“any error, if there is to be one, should be … in favor of allowing the class action”); Brandon, 106
A.D.2d at 168; Pesantez, Index No. 128988/1993 (Sup. Ct. N.Y. Cty. 1998) (J. Cahn), aff’d 251
A.D.2d 11 (1st Dept. 1998).
2. THIS ACTION SATISFIES ALL THE PREREQUISITES OF CPLR § 901
i. The Class Is So Numerous That Joinder Of All Members Is Impracticable
Section 901(a)(1) requires that the class be so numerous that joinder of all class members
is impracticable. There is no “mechanical test” nor a “set quantity” of prospective class members
that must exist to determine whether class membership is so numerous as to make joinder under
CPLR §901(a)(1) impracticable. See e.g., Krebs v. The Canyon Club, 22 Misc. 3d 1125(A) at *7
(Sup. Ct. Westchester Cty. 2009) (citing Friar v. Vanguard Holding Corp., 78 A.D.2d 83, 96 (2d
Dept. 1980)). “Each case depends upon the particular circumstances surrounding the proposed
class and the court should consider the reasonable inferences and common sense assumptions from
the facts before it.” Friar, 78 A.D.2d at 96. There is also no requirement that the exact number of
class members be immediately known. See Smith v. Atlas International Tours, et al., 80 A.D.2d
762, 764 (1st Dept. 1981); Matter of Smith v. Berlin, 2013 NY Slip Op 52305(U), ¶ 8 (N.Y. Cty
Sup. Ct. 2009).
Courts have held the general threshold for impracticability of joinder to be around 40,
although numerosity has been satisfied with less than 40 class members. See e.g. Pesantez, 251
A.D.2d at 11 (holding that 40 class members was “many more” than required to satisfy numerosity
16
and certifying class of “about 80” workers); Galdamez, at * 2 (affidavits indicating class size of
between 30-70 workers was sufficient to satisfy numerosity); Lopez v. Setauket Car Wash & Detail
Ctr., No. CV-12-6324, 2016 U.S. Dist. LEXIS 630, at *3 (E.D.N.Y. Jan. 5, 2016) (“numerosity is
presumed at a level of 40 members.”) (quoting Consolidated Rail Corp. v. Town of Hyde Park, 47
F.3d 473, 483 (2d Cir. 1995)).
In this case, the class is significantly larger than 40: the work schedules provided by
Defendants show that it retained over 400 dancers and adult entertainers to perform services in
2013 alone. See also Tompkins Aff. Exhibit H (amended complaint with amended caption); Ex.
B. Based on the foregoing, the “numerosity” requirement has clearly been satisfied.
ii. The Questions of Law And Fact Common To The Class Predominate Over
Questions Affecting Only Individual Class Members
1. The Claims of Each Member of the Putative Class Arise from a Common
Wrong
The second requirement of § 901 is that common questions of law or fact
Preview
FILED: SUFFOLK COUNTY CLERK 02/26/2016 03:37 PM INDEX NO. 063363/2014 NYSCEF DOC. NO. 36 RECEIVED NYSCEF: 02/26/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF SUFFOLK KRYSTAL SHEPPARD and DOMINIQUE RUIZ, individually and on behalf of all other persons similarly situated, Index No.: 63363/2014 Plaintiffs, -against- BK VENTURE GROUP LTD. d/b/a STARLETS, KEVIN BURCH, JOSEPH JOHNSON, and/or other entities affiliated with or controlled by BK VENTURE GROUP LTD., KEVIN BURCH or JOSEPH JOHNSON, Defendants. MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFFS’ UNOPPOSED MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT LEEDS BROWN LAW, P.C. Jeffrey K. Brown Michael A. Tompkins Brett Cohen JOHN BREEN, ESQ. Laura Reznick John Breen 1 Old Country Road, Suite 347 1355 Motor Pkwy, Suite 2 Carle Place, New York 11514 Hauppauge, NY 11749 Attorneys for Plaintiffs and Proposed Class Of Counsel to Leeds Brown Law, P.C. TABLE OF CONTENTS Preliminary Statement.............................................................................................................1 Statement of Fact .....................................................................................................................2 Argument ..................................................................................................................................3 Point I: The Court Should Utilize the Two-Step Process for Approving the Settlement .......3 Point II: The Proposed Settlement Agreement Provides Probable Cause for Preliminary Approval ...............................................................5 A. The Settlement is Fair and Reasonable ........................................................5 1. Procedural Fairness: The Settlement Should be Granted the Presumption of Fairness ...................................................................6 2. Substantive Fairness: The Agreement is Substantively Fair and Reasonable .............................................................................................9 B. Courts Routinely Approval Similar Settlements........................................13 Point III: Class Certification Should be Granted..................................................................13 A. Plaintiffs Have Satisfied the Elements of CPLR § 901 .............................15 B. Section 902 Factors Support Class Certification .......................................25 Conclusion ..............................................................................................................................26 Plaintiffs submit this memorandum of law in support of their unopposed motion for preliminary approval of the proposed settlement pursuant to CPLR §§ 901, 902, 904 and 908, certification of the proposed class, appointment of class counsel, authorization to distribute the proposed notice of settlement to the class, authority to amend the complaint to reflect the new caption, and approval of the class action settlement procedures. PRELIMINARY STATEMENT This action for unpaid wages and gratuities is brought on behalf of the Named Plaintiffs KRYSTAL SHEPPARD and DOMINIQUE RUIZ (the “Named Plaintiffs”), and a putative class of individuals (collectively “Plaintiffs” or “Class” and “Class Members”) who performed services for Defendants BK VENTURE GROUP LTD. d/b/a STARLETS; KB VENTURE GROUP, LLC d/b/a LOVE AND LUST; KEVIN BURCH (the “Starlets Defendants”); and/or any other entities affiliated with or controlled by BK VENTURE GROUP LTD. d/b/a STARLETS; KB VENTURE GROUP, LLC d/b/a CLUB LOVE AND CLUB LUST; KEVIN BURCH (collectively “Defendants”) between May 1, 2008 and the date of the Preliminary Approval Order, in one or more of the following classifications: dancer, entertainer, adult performer, or in other related job classifications at Defendants’ adult entertainment establishment commonly known as Starlets, Club Love, and/or Club Lust (hereinafter, “Starlets”). Plaintiffs respectfully request that this Court (1) preliminarily approve the proposed Settlement Agreement and Release (“Agreement”) annexed to the Affirmation of Michael A. Tompkins (“Tompkins Aff.”) 1 as Exhibit A at § 1.32, (2) certify the proposed Class, (3) appoint Leeds Brown Law, P.C. as Class Counsel, (4) authorize distribution of the proposed Notice of 1 Unless otherwise indicated, all exhibits are attached to the Tompkins Aff. 1 Settlement and claim form, (5) approve the class action settlement procedures including the implementing dates, (6) approve the amended complaint, and (7) grant any other relief this Court deems proper. Defendants do not oppose this motion. Similar settlements have been approved by courts in New York for approval related to the similar factual scenarios and agreements like this one. See e.g., In re Penthouse Exec. Club Comp. Litig., 2013 U.S. Dist. LEXIS 63065 (S.D.N.Y. Apr. 29, 2013). As set forth below, the proposed Agreement (“Settlement” or “Agreement”) is substantively fair and reasonable and was reached through arm’s-length negotiations between experienced counsel. Plaintiffs have satisfied all elements of §§ 901 and 902 of the CPLR for class certification, and certifying this case is an efficient method of resolving this dispute. Further, the requirements of §§ 904 and 908 necessitate the sending of court-authorized notice to Class Members before a Fairness Hearing can be held and final approval of the Settlement can be granted. Accordingly, Plaintiffs request that this unopposed motion be granted. STATEMENT OF FACTS As alleged in the complaint, Defendants employed Plaintiffs and other similarly situated workers as dancers, entertainers and adult performers at Defendants’ adult entertainment facilities, including those commonly known as Starlets, Club Love and/or Club Lust. As alleged in Plaintiffs’ Complaint and supported by Plaintiff Ruiz’s affidavit, the Named Plaintiffs allege that they, along with other dancers and entertainers, were subject to Defendants’ unlawful policy of failing to remit wages and gratuities to Plaintiffs as required under Labor Law and its implementing regulations. See Exhibit B (“Ruiz Aff.”). According to Plaintiffs’ Complaint: (1) Starlets did not pay its dancers/entertainers any hourly wage and only paid them some portion of the tips they received from the customers; (2) dancers/entertainers did not receive all of the charges that a customer 2 would pay for the dancer/entertainer’s services; (3) dancers/entertainers were subject to fines, fees, and deductions from their rightfully owed wages; and (4) dancers/entertainers at all of Defendants’ establishments were subject to the same policies and procedures. See Class Action Complaint, NYSCEF Index No. 63363/2014, Dkt. No. 2. 2 ARGUMENT POINT I: THE COURT SHOULD UTILIZE THE TWO-STEP PROCESS FOR APPROVING THE SETTLEMENT CPLR § 908 states that “A class action shall not be dismissed, discontinued, or compromised without the approval of the court. Notice of the proposed dismissal, discontinuance, or compromise shall be given to all members of the class in such manner as the court directs.” Courts in New York typically consider a two-tier approach to reviewing the fairness and reasonableness of a settlement agreement in the class-action context: (1) preliminary approval of settlement and distribution of notice; and (2) scheduling a fairness hearing and consideration of final approval of the settlement based on an application with supporting materials. See e.g., In re Penthouse Exec. Club Comp. Litig., 2014 U.S. Dist. LEXIS 5864 (S.D.N.Y. Jan. 14, 2014) (Judge Kimba M. Wood granting final approval of the settlement after the distribution notice to class members and the holding of a fairness hearing); see also, Bartley v. 335 Alpha, Inc., Index No. 04855/2013 (Sup. Ct. Suffolk Cty. Nov. 5, 2014) (Judge William B. Rebolini granting final approval after a fairness hearing and notice to all class members who performed services and earned gratuities); Veselovsky v. Meadow Club Caterers, Index No. 10433/2013 (Sup. Ct. Suffolk Cty. Oct. 19, 2015) (Judge Daniel Martin, same); Kreskowski, v. DBD Caterers Inc., d/b/a The 2 Unless otherwise indicated, all references to NYSCEF Documents, including “Doc. No.” refer to those under the Index Number in the instant case. 3 Vineyards, Index No. 09506/2013 (Sup. Ct. Suffolk Cty. Jan. 20, 2015) (Judge W. Gerard Asher, same); Chhab v. Montclair Hotels GCNY, LLC, Index No. 2358/2012 (Sup. Ct. Nassau Cty., July 11, 2015) (Judge Denise Sher granting final approval after the distribution of notice to all class members who worked as service employees at defendants’ facility and the holding of a fairness hearing); Parada v. Westbury Manor Enter., Inc., Index No. 601125/2011 (Sup. Ct. Nassau Cty. Feb. 20, 2014) (Judge Vito DeStefano granting preliminary approval and authorizing distribution of notice, then conducting a fairness hearing as to the nature of the terms and conditions of the agreement); Chavarria v. Crest Hollow Country Club, Index No. 017464/2011 (Sup. Ct. Nassau Cty. Dec. 17, 2013) (Judge DeStefano granting final approval after the two-stage approach); Toledo v. DCJ Catering Corp., Index No. 600994/2011 (Sup. Ct. Nassau Cty. Dec. 21, 2012) (Judge Timothy Driscoll, same). First, at the preliminary approval stage, courts (i) review the proposed settlement, (ii) define the scope of the class, (iii) approve the distribution of notice to the class, (iv) grant class counsel status, and (v) set a schedule for deadlines including the date of the fairness hearing. See, e.g., Parada, (preliminarily approving class-wide settlement, allowing for distribution of notice, and scheduling a fairness hearing before granting final approval). Preliminary approval “requires only an ‘initial evaluation’ of the fairness of the proposed settlement on the basis of written submissions and, in some cases, an informal presentation by the settling parties.” Penthouse, 2013 U.S. Dist. LEXIS 63065, at *6 (internal quotations omitted). Upon preliminary approval being granted, notice is distributed to class members advising them of their ability to participate, object, or opt out of the settlement – or else they are bound by its terms. Class members are also provided with the date of the fairness hearing should they choose to object, attend, or be heard. See generally McReynolds v. Richards-Cantave, 588 F.3d 790, 803 4 (2d Cir. 2009); see also Penthouse, 2013 U.S. Dist. LEXIS 63065 at *5. At the second stage and after the notice has been distributed to the class, courts can evaluate the settlement with the benefit of the class members’ input, including objections. McReynolds, 588 F.3d at 803; see also Penthouse, 2013 U.S. Dist. LEXIS 63065 at *5. Courts also have a full opportunity to evaluate the proposed settlement, the participation and interest level from class members, the risks related to continuing litigation, and the overall fairness of the proposed settlement with the benefit of calculations and evaluations by the parties’ counsel and experts, if necessary. POINT II: THE PROPOSED SETTLEMENT AGREEMENT PROVIDES “PROBABLE CAUSE” FOR PRELIMINARY APPROVAL A. The Settlement is Fair and Reasonable “In reviewing a proposed settlement for preliminary approval, rather than final approval, the Court need only determine whether the proposed settlement is possibly fair, adequate, and reasonable.” In re Take Two Interactive Secs. Litig., 2010 U.S. Dist. LEXIS 143837, at *31 (S.D.N.Y. June 29, 2010). Courts grant preliminary approval so long as they find “probable cause to submit the [settlement] proposal to class members and hold a full-scale hearing as to its fairness.” In re Penthouse, 2013 U.S. Dist. LEXIS 63065 at *7 (quoting In re Traffic Exec. Ass’n, 627 F.2d 631, 634 (2d Cir. 1980) (internal citation omitted)). Preliminary approval of a proposed settlement is considered appropriate where, as here, the agreement is the result of “serious, informed, and non-collusive negotiations, where there are no grounds to doubt its fairness and no other obvious deficiencies … and where the settlement appears to fall within the range of possible approval.” In re Gilat Satellite Networks, Ltd., No. 02 Civ. 1510 (CPS), 2007 U.S. Dist. LEXIS 29062, 2007 WL 1191048, *9 (E.D.N.Y. April 19, 2007); see also Tart v. Lions Gate Entm’t Corp., No. 14-CV-8004 (AJN), 2015 U.S. Dist. LEXIS 139266, 5 at *13 (S.D.N.Y. Oct. 13, 2015) (preliminary approval should be granted as long as proposed settlement “appears to fall within the range of possible approval.”) (quoting Clark v. Ecolab, Inc., 2009 U.S. Dist. LEXIS 108736, at *15 (S.D.N.Y. Nov. 17, 2009)) (internal quotations omitted); Slobodan Karic v. Major Auto. Cos., No. 09 CV 5708 (ENV), 2015 U.S. Dist. LEXIS 171730, at *22 (E.D.N.Y. Dec. 22, 2015) (probable cause exists if the proposed settlement appears to be “fair, adequate, and reasonable, and not the product of collusion.”) (quoting Joel A. v. Giuliani, 218 F.3d 132, 138 (2d Cir. 2000)). To determine whether a settlement is possibly fair, adequate, and reasonable, courts consider “both the negotiating process that led to the settlement and the terms of the agreement itself.” Take Two Interactive Secs. Litig., 2010 U.S. Dist. LEXIS 143837, at *31. 1. Procedural Fairness: The Settlement Should Be Granted the Presumption of Fairness On a motion for preliminary approval, procedural fairness is presumed so long as the proposed agreement is the result of (1) arm’s-length negotiations, (2) among experienced counsel, (3) after due diligence or discovery. See McReynolds v. Richards-Cantave, 588 F.3d 790, 803 (2d Cir. 2009); see also Fiala v. Metro. Life Ins. Co., 27 Misc. 3d 599, 607 (Sup. Ct. N.Y. Cty. 2010) (A “presumption of fairness, adequacy, and reasonableness may attach to a class settlement reached in arm’s-length negotiations between experienced, capable counsel after meaningful discovery”) (quoting Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 116 (2d Cir. 2005) (internal quotations omitted)). The presumption of procedural fairness is even stronger where, as here, a fourth element is satisfied: (4) the parties engaged a neutral mediator to help facilitate the settlement and the agreement is endorsed by the mediator. Kelen v. World Fin. Network Nat’l Bank, 12-CV-5024 (VSB), 2014 U.S. Dist. LEXIS 112079, *22 (S.D.N.Y. July 28, 2014). Here, all four factors are met. 6 i. The Agreement Resulted from Arms-Length Negotiations with the Help of an Experienced Mediator As outlined in more detail in the Tompkins Affirmation, this case involves a bona fide dispute that was litigated in an adversarial manner prior to reaching settlement. The proposed Agreement was the product of intense negotiations following motion practice and a formal mediation session facilitated by Mediator Martin Scheinman, between Plaintiffs’ counsel and Defendants’ counsel – including two firms for Defendants. See Exhibit F, Curriculum Vitae of Martin F. Scheinman, Esq.; see also Penthouse, 2014 U.S. Dist. LEXIS 5864 at *14-15 (citing the involvement of experienced mediators – including Mediator Scheinman – as an indication of the procedural fairness of the proposed settlement). ii. Plaintiffs Are Represented by Competent, Experienced Counsel The Named Plaintiffs are represented by Leeds Brown Law, P.C. (“Leeds Brown”), whose attorneys are experienced in labor and employment law. Leeds Brown has represented numerous clients in wage and hour settlements under state and federal law, including in the entertainment industry. See, e.g., Penthouse, 2014 U.S. Dist. LEXIS 5864 at *14-15; Tart v. Lions Gate Entm’t Corp., 2015 U.S. Dist. LEXIS 139266 at *7 (S.D.N.Y. Oct. 13, 2015). (“Leeds Brown Law, P.C. [and co-counsel] are experienced and well-qualified employment and class action lawyers with expertise in prosecuting and settling labor law cases. The substantial work that Plaintiffs’ counsel has performed in investigating, litigating and reaching a settlement in this case demonstrates their commitment to the class and representing the class’s interests.”); Garcia v. Exec. Club LLC, No. 10-CV-1545 (SHS), 2012 U.S. Dist. LEXIS 189823, at *6 (S.D.N.Y. May 10, 2012); Veselovsky, Index No. 10433/2013 (J. Martin); Bartley, Index No. 04855/2013 (J. Rebolini); Gonzalez v. NHPI, Index No. 12654/2012 (J. Bruno); Orgera v. John Anthonys On The Water Inc., Index No. 10374/2012 (Sup. Ct. Nassau Cty., July 18, 2014) (J. Brown); Chavarria, Index No. 17464/2011 7 (Sup. Ct. Nassau Cty., Dec. 13, 2013) (J. DeStefano); Ruiz, Index No. 600317/2010 (J. DeStefano); Toledo, Index No. 600944/2011; Williams, Index No. 108648/2010 (certifying an Article 9 class of workers at John F. Kennedy International Airport); Kehn v. Plainview Hospitality, LLC, Index No. 9866/2012 (Sup. Ct. Nassau Cty., April 8, 2014); Carlin v. Singh Hospitality Group, Inc., Index No. 14702/2012 (Sup. Ct. Nassau Cty., Dec. 20, 2013); Lopez v. Bethpage Associates LLC, Index No. 2012/3465 (Sup. Ct. Nassau Cty., Aug. 14, 2013); Macaluso v. Woodbury Int’l, Inc., Index No. 11/105520 (Sup. Ct. Nassau Cty. Sept 9, 2013). iii. Class Counsel Engaged in Due Diligence to Ensure that the Settlement is Fair and Reasonable Class Counsel has and will continue to engage in due diligence through a review of the Defendants’ documents, including (to the extent they exist) work schedules, staffing sheets, revenue documents, bills, invoices, time records, pay/tip records, credit card receipts, ledgers, and other related documents – electronic or otherwise, as well as corporate and personal tax returns for the Settlement Period (the “Review Records”). Prior to execution of the proposed Agreement, Class Counsel conducted a review of the schedules provided by Defendants to ensure that the settlement allocation formula agreed to at the August 13, 2015 mediation is fair to all class members. See Tompkins Aff. ¶¶ 29-32. Upon receiving the Class List from Defendants, Class Counsel will conduct additional due diligence to ensure that all of the settlement is fair including the allocation formula. See Tompkins Aff. ¶ 39. While Notice is pending, Class Counsel will retain a certified accountant to perform due diligence regarding financial representations made by Defendants during the course of the settlement discussions. Class Counsel and the CPA will review documents and materials from Defendants to verify Defendants’ representations regarding class size, damage components, and Defendants’ ability to withstand a greater judgment. See Ex. A, § 3.6. 8 2. Substantive Fairness: The Agreement is Substantively Fair and Reasonable As illustrated above in Point 1, the proposed Agreement is procedurally fair because it resulted from arm’s-length negotiations between experienced counsel after discovery and due diligence – and the Agreement builds in a notice process in line with the mandates of CPLR § 904. Where, as here, a proposed settlement agreement is the result of a fair process, the substantive fairness of the settlement agreement is generally presumed on a motion for preliminary approval unless itcontains “obvious defects.” Penthouse, 2013 U.S. Dist. LEXIS 63065 at *7 (probable cause presumed where McReynolds factors are met and proposed agreement has “no obvious defects.”); see also Take Two Interactive Secs. Litig., 2010 U.S. Dist. LEXIS 143837, at *31 (settlement that is procedurally fair should be preliminarily approved absent “obvious deficiencies” such as “unduly preferential treatment of class representatives or of segments of the class, or excessive compensation for attorneys.”). i. The Agreement is Substantively Fair for All Class Members As noted, at the preliminary approval stage, a proposed settlement agreement is presumed to be substantively fair so long as it contains no obvious defects. It is not necessary for the Court at this stage to conduct a thorough evaluation of the proposed Agreement. However, it is worth noting that a more thorough review of the Proposed Agreement would demonstrate that the agreement is substantively fair to all class members. The Agreement establishes a Gross Settlement Fund for allocation purposes in the amount of $1,200,000 for the Settlement Class. See Ex. A § 1.16. Upon final approval by the Court, this fund will provide members of the Settlement Class their unpaid wages and gratuities for the relevant period. See generally id. All putative class members who file claim forms are guaranteed a minimum amount, with additional “points” granted to each putative class member based on an 9 estimate of the duration of her employment. The Agreement provides a mechanism for class members to dispute that estimate. Id. at §§ 3.5(A), 3.5(D). In addition to the traditional mailing of the Proposed Notice and Claim Forms (see Exhibits D and E) through a third-party claims administrator, the Agreement provides for dissemination of other forms of notice, including print, web and social media advertising. See Ex. A §§ 2.4, 2.5. Additionally, those who worked for Defendants prior to 2013 are guaranteed a minimum amount and are given a mechanism to increase that amount if they can verify the length of their employment with Defendants. Id. at § 3.5(B), 3.5(D). The Agreement also sets aside $35,000 in Reserve Funds for late-filed claims, errors, and omissions from the Class List, with priority given to class members who worked prior to 2013. Id. at § 3.1(B). In this case, even a cursory review of the proposed Agreement would reveal that the Agreement contains no obvious deficiencies. See Ex. A. Under the terms of the Agreement, two Named Plaintiffs are compensated using the same formula as the putative class members. The proposed service awards of $7,500 for the Named Plaintiffs are modest compared to service awards that have been approved in similar cases, and are reasonable to compensate them for their efforts to secure relief for the class. See, e.g., In re Penthouse Executive Club Litig., 10-CV-1145(KMW) (approving service awards of $15,000 for each named plaintiff and $8,750 for each opt-in Plaintiff); Chavarria v. Crest Hollow Country Club at Woodbury Inc., Index No. 17464/2011 (Sup. Ct. Nassau Cty., Dec. 13, 2013) (J. DeStefano) (approving service awards of a combined $25,000 and $8,333.33 for each Named Plaintiff); Toure v. Amerigroup Corp., No. 10 Civ. 5391, 2012 WL 3240461, at *6 (E.D.N.Y. Aug. 6, 2012) (approving awards of $10,000 for each class representative); Lovaglio v. W & E Hospitality, Inc., No. 10 Civ. 7351, 2012 WL 2775019, at *4 (S.D.N.Y. July 6, 2012) (approving service awards of $10,000 for each named plaintiff); Sewell 10 v. Bovis Lend Lease, Inc., No. 09-CV-6548, 2012 WL 1320124, at *14-15 (S.D.N.Y. Apr. 16, 2012) (approving service payments of $10,000 and $15,000). Similarly, the proposed fee award for Class Counsel is well within the range of reasonableness. See, e.g., deMunecas v. Bold Food, LLC, No. 09 CIV. 00440 DAB, 2010 WL 3322580, at *9-10 (S.D.N.Y. Aug. 23, 2010) (“Class Counsel’s request for 33% of the Fund [exclusive of costs] is reasonable under the circumstances of this case and is consistent with the norms of class litigation in this circuit.”); Davis v. J.P. Morgan Chase & Co., Inc., 827 F. Supp. 2d 172, 184-86 (W.D.N.Y. 2011) (awarding one-third of a $42 million settlement in a FLSA and NYLL case); Willix v. Healthfirst Inc., 2011 U.S. Dist. LEXIS 21102 at *17 (awarding class counsel one-third of $7,675,000 settlement fund in FLSA and NYLL wage and hour action); Toure v. Amerigroup Corp., Case No. 10-cv-5391, 2012 U.S. Dist. LEXIS 110300 (E.D.N.Y. 2012) (awarding one-third of $4,450,000 in a wage and hour case); Mohney v. Shelly’s Prime Steak, Case No. 06-cv-4270, 2009 U.S. Dist. LEXIS 27899 (S.D.N.Y. Mar. 31, 2009) (awarding 33% of $3,265,000 fund in FLSA and NYLL tip misappropriation case). Class Counsels’ fee under the Agreement is particularly reasonable in light of the fact that the fee award is inclusive of all costs borne by Class Counsel in pursuing and settling the litigation, including the mediator’s fees and the cost of notice and payment of the Settlement Claims Administrator’s fees. ii. The Settlement is Reasonable In Light of the Risks of Continued Litigation In deciding to recommend the proposed Agreement to Named Plaintiffs and putative class members, Plaintiffs’ Counsel considered the risks of continued litigation, including the risks of establishing liability, the difficulty of establishing exact damages, the possibility that Defendants might succeed on an affirmative defense that would significantly reduce Plaintiffs’ recovery, the difficulty of locating putative class members, and the risk of being unable to collect on an eventual 11 judgment due to Defendants’ financial difficulties. While Plaintiffs believe that they could establish liability and damages, ultimate success was never guaranteed. Plaintiffs would have to overcome numerous litigation hurdles (i.e. certification of the Class, costly discovery, and potential motions such as summary judgment, and possible trial) which would likely have taken additional years at significant cost. Defendants insisted that they would oppose class certification if the case did not settle. Moreover, given the difficulty of establishing individual damages in light of Defendants’ poor recordkeeping, there was significant risk as to whether Plaintiffs would be able to achieve a monetary result greater than the $1,200,000 Gross Settlement Fund created by the Agreement. Because of these obstacles, the potential recovery at trial may have been significantly less than what was achieved, and the Named Plaintiffs might not have been able to obtain recovery for similarly situated dancers and entertainers. Even if Plaintiffs were able to achieve a greater monetary result, Defendants represented at mediation that they would not be able to withstand a judgment greater than the settlement amount. Plaintiffs’ counsel will be reviewing relevant financial records to verify these representations. In contrast to the uncertainty and risks that are present in continued litigation, this Settlement produces an immediate significant recovery for Plaintiffs. Immediate recovery is especially valuable in this case because “[g]iven the itinerant nature of the class, settling now—as opposed to receiving relief after a final appeal—also increases the chances that class members can be found.” Hart v. RCI Hosp. Holdings, 2015 U.S. Dist. LEXIS 126934, at *23 (S.D.N.Y. Sep. 22, 2015). (given transient nature of class of dancers and entertainers and benefit of immediate recovery in a similar case “weigh[ed] heavily in favor of approving the settlement.”). 12 B. Courts Routinely Approve Similar Settlements Courts in New York and around the country have approved similar settlements in similar cases. E.g. Hart , 2015 U.S. Dist. LEXIS 126934 (approving settlement on behalf of class of adult entertainers who alleged that Defendants misclassified them as independent contractors and failed to pay them minimum wage and remit gratuities); In re Penthouse Exec. Club Comp. Litig., 2014 U.S. Dist. LEXIS 5864 (S.D.N.Y. Jan. 14, 2014) (granting final approval of Penthouse settlement); Flynn v. N.Y. Dolls Gentlemen’s Club, 2014 U.S. Dist. LEXIS 142588 (S.D.N.Y. Oct. 6, 2014) (granting preliminary approval of similar settlement on behalf of dancers and entertainers); Flynn v. N.Y. Dolls Gentlemen’s Club, 2015 U.S. Dist. LEXIS 82772 (S.D.N.Y. Apr. 27, 2015) (granting final approval of Flynn settlement); Diaz v. Scores Holding Co., 2011 U.S. Dist. LEXIS 112187 (S.D.N.Y. July 11, 2011) (granting final approval of settlement on behalf of dancers and entertainers for similar wage and hour violations); see also Encarnacion v. J.W. Lee, Inc., No. 14- CIV-61927-DIMITROULEAS, 2015 U.S. Dist. LEXIS 144858 (S.D. Fla. Oct. 22, 2015) (same). For the reasons articulated herein, Plaintiffs submit that the proposed Agreement is fair and reasonable and provides this Court adequate probable cause to grant preliminary approval of the settlement for the purpose of authorizing mailing of notice to the Class and scheduling a fairness hearing for final approval of the Settlement. POINT III: CLASS CERTIFICATION SHOULD BE GRANTED Class certification is routinely granted in wage and hour actions in the State of New York. See generally Stecko v. RLI Insurance Company, 2014 N.Y. App. Div. LEXIS 7065 (1st Dept. 2014); Williams v. Air Serv Corp., 121 A.D.3d 441, 442 (1st Dept. 2014) (class action “is superior to the prosecution of individualized claims” in action to recover unpaid wages); Weinstein et al v. Jenny Craig Operations, Inc., Index No. 11/105520 (“a class action also yields a public benefit 13 which makes it superior to an administrative complaint.”); Nawrocki v. Proto Construction and Development Corp., 82 A.D.3d 534, 536 (1st Dept. 2011) (“class action is the superior vehicle for resolving this wage dispute”); Ortiz v. J.P. Jack Corp., 286 A.D.2d 671 (2d Dept. 2001); Pesantez v. Boyle Environmental Services, Inc., 251 A.D.2d 11, 12 (1st Dept. 1998) (class action is the “best method of adjudicating” wage and hour disputes); Thomas v. Meyers Assoc., L.P., 39 Misc 3d 1217[A], 1217A, 2013 NY Slip Op 50650[U], *11 (Sup. Ct., N.Y. Cty. 2013) (“there is no question that a class action is the superior method” to pursue a case for unpaid wages because “given the relatively small size of each claim, as well as fear of retaliation, many members of the class would be reluctant and unable to afford to pursue redress of their claims absent class certification.”). More specifically, in New York and across the country, class certification is routinely granted in actions on behalf of dancers and entertainers seeking payment of unpaid wages and gratuities that were improperly withheld and recoupment of fines by their employers. See, e.g., Hart, 2010 U.S. Dist. LEXIS 137129 at *14-23 (granting certification to class of adult entertainers seeking unpaid wages and gratuities because “the issues in the class action that are subject to generalized proof, and thus applicable to the class as a whole . . . predominate over those issues that are subject only to individualized proof.”); Penthouse, 2013 U.S. Dist. LEXIS 63065 at *12- 14 (same); Flynn v. N.Y. Dolls Gentlemen’s Club, 2015 U.S. Dist. LEXIS 82772 (S.D.N.Y. Apr. 27, 2015) (same); Diaz v. Scores Holding Co., 2008 U.S. Dist. LEXIS 38248 (S.D.N.Y. May 9, 2008) (granting conditional class certification of class of bartenders, servers, dancers, and other tipped employees for unpaid wages and misappropriated tips); see also Espinoza v. Galardi S. Enters., No. 14-21244-CIV-GOODMAN, 2016 U.S. Dist. LEXIS 2904, at *7 (S.D. Fla. Jan. 11, 14 2016) (noting that every federal court faced with the issue has granted class certification in wage and hour cases brought by dancers and entertainers against strip clubs and collecting cases). A. PLAINTIFFS HAVE SATISFIED THE ELEMENTS OF CPLR § 901 1. CPLR § 901 IS TO BE LIBERALLY CONSTRUED CPLR § 901(a) provides that one or more members of a class may sue as representative parties on behalf of a class if: 1. the class is so numerous that joinder of all members whether otherwise required or permitted is impracticable [“numerosity”]; 2. there are questions of law or fact common to the class which predominate over any questions affecting only individual members [“predominance”]; 3. the claims or defenses of the representative parties are typical of the claims or defenses of the class [“typicality”]; 4. the representative parties will fairly and adequately protect the interests of the class [“adequacy”]; and 5. a class action is superior to other available methods for the fair and efficient adjudication of the controversy [“superiority”]. It is well established that, in deciding whether to certify a class, “a court must be mindful of [the Appellate Division’s] holding that the class certification statute should be liberally construed.” Kudinov v. Kel-Tech Const. Inc., 65 A.D.3d 481, 481 (1st Dept. 2009) (citing Englade v. Harper Collins Publs., Inc., 289 A.D.2d 159, 159 (1st Dept. 2001)); see also Globe Surgical Supply v. GEICO Ins. Co., 59 A.D.3d 129, 135 (2nd Dept 2008) (“Article 9 of the CPLR is to be ‘liberally construed’”); Gonzalez v. Personal Touch Moving, Inc., 2014 N.Y. Misc. LEXIS 3568, at *2 [Sup Ct, NY County Apr. 29, 2014, No. 450146/14] (“Article 9 of the CPLR is to be liberally construed in favor of granting class certification.”); Pruitt v. Rockefeller Center Properties, Inc., 167 A.D.2d 14, 21 (1st Dept. 1991) (“[a]ppellate courts in this state have repeatedly held that the class action statute should be liberally construed … any error, if there is to be one, should be ... in 15 favor of allowing the class action”); Galdamez v. Biordi Constr. Corp., 13 Misc. 3d 1224(A) (Sup. Ct. N.Y. Cty. Oct. 17, 2006), aff’d 855 N.Y.S.2d 104 (1st Dept. 2008). While, as demonstrated below, the instant action clearly meets the requirements for class certification, any doubts must be resolved in favor of class certification. Pruitt, 167 A.D.2d at 21 (“any error, if there is to be one, should be … in favor of allowing the class action”); Brandon, 106 A.D.2d at 168; Pesantez, Index No. 128988/1993 (Sup. Ct. N.Y. Cty. 1998) (J. Cahn), aff’d 251 A.D.2d 11 (1st Dept. 1998). 2. THIS ACTION SATISFIES ALL THE PREREQUISITES OF CPLR § 901 i. The Class Is So Numerous That Joinder Of All Members Is Impracticable Section 901(a)(1) requires that the class be so numerous that joinder of all class members is impracticable. There is no “mechanical test” nor a “set quantity” of prospective class members that must exist to determine whether class membership is so numerous as to make joinder under CPLR §901(a)(1) impracticable. See e.g., Krebs v. The Canyon Club, 22 Misc. 3d 1125(A) at *7 (Sup. Ct. Westchester Cty. 2009) (citing Friar v. Vanguard Holding Corp., 78 A.D.2d 83, 96 (2d Dept. 1980)). “Each case depends upon the particular circumstances surrounding the proposed class and the court should consider the reasonable inferences and common sense assumptions from the facts before it.” Friar, 78 A.D.2d at 96. There is also no requirement that the exact number of class members be immediately known. See Smith v. Atlas International Tours, et al., 80 A.D.2d 762, 764 (1st Dept. 1981); Matter of Smith v. Berlin, 2013 NY Slip Op 52305(U), ¶ 8 (N.Y. Cty Sup. Ct. 2009). Courts have held the general threshold for impracticability of joinder to be around 40, although numerosity has been satisfied with less than 40 class members. See e.g. Pesantez, 251 A.D.2d at 11 (holding that 40 class members was “many more” than required to satisfy numerosity 16 and certifying class of “about 80” workers); Galdamez, at * 2 (affidavits indicating class size of between 30-70 workers was sufficient to satisfy numerosity); Lopez v. Setauket Car Wash & Detail Ctr., No. CV-12-6324, 2016 U.S. Dist. LEXIS 630, at *3 (E.D.N.Y. Jan. 5, 2016) (“numerosity is presumed at a level of 40 members.”) (quoting Consolidated Rail Corp. v. Town of Hyde Park, 47 F.3d 473, 483 (2d Cir. 1995)). In this case, the class is significantly larger than 40: the work schedules provided by Defendants show that it retained over 400 dancers and adult entertainers to perform services in 2013 alone. See also Tompkins Aff. Exhibit H (amended complaint with amended caption); Ex. B. Based on the foregoing, the “numerosity” requirement has clearly been satisfied. ii. The Questions of Law And Fact Common To The Class Predominate Over Questions Affecting Only Individual Class Members 1. The Claims of Each Member of the Putative Class Arise from a Common Wrong The second requirement of § 901 is that common questions of law or fact