Jane Does 1-2, Plaintiffs-Appellees, Eva Cabrera and Brittney Halverson (17-1801); B.D. (17-1802); C.T. (17-1827), Objectors-Appellants.
Déjà Vu Consulting, Inc., dba Déjà Vu of Saginaw, Inc., nka Déjà Vu Services, Inc., et al., Defendants-Appellees.
Argued: October 17, 2018
from the United States District Court for the Eastern
District of Michigan at Detroit. No. 2:16-cv-10877-Stephen J.
Murphy, III, District Judge.
L. Lichten, LICHTEN & LISS-RIORDAN, P.C., Boston,
Massachusetts, for all Appellants.
J. Thompson, SOMERS SCHWARTZ, P.C., Southfield, Michigan, for
Jane Doe Appellees.
Bradley J. Shafer, SHAFER & ASSOCIATES, P.C., Lansing,
Michigan, for Déjà Vu Appellees.
L. Lichten, Shannon Liss-Riordan, Matthew Thomson, LICHTEN
& LISS-RIORDAN, P.C., Boston, Massachusetts, for
Appellants in 17-1801.
Bradley J. Shafer, Matthew J. Hoffer, SHAFER &
ASSOCIATES, P.C., Lansing, Michigan, for Déjà
Vu Appellees. Charles P. Yezbak, III, Daniel Eduardo
Arciniegas, YEZBAK LAW OFFICES, Nashville, Tennessee, for
Appellant in 17-1802.
Allen McDonald, LACY, PRICE & WAGNER, P.C., Knoxville,
Tennessee, for Appellant in 17-1827. Beth M. Rivers, PITT
MCGEHEE PALMER & RIVERS, P.C., Royal Oak, Michigan, for
Jane Doe Appellees.
Before: COLE, Chief Judge; WHITE and NALBANDIAN, Circuit
C.J., delivered the opinion of the court in which NALBANDIAN,
J., joined, and WHITE, J., joined in part.
class of 28, 177 exotic dancers alleged that
Déjà Vu dance clubs violated the Fair Labor
Standards Act and state wage-and-hour laws,
Déjà Vu and the class of dancers entered into a
settlement agreement. The district court approved the
settlement over the objections of four class members who now
appeal, arguing that the settlement was fundamentally unfair
and failed to comport with procedural requirements for class
action settlements. Because the district court did not abuse
its discretion in approving the settlement, we affirm.
class of dancers was not the first to sue Déjà
Vu for alleged Fair Labor Standards Act ("FLSA")
and state law violations. In 2008, a class of dancers filed a
class action lawsuit in the Eastern District of Michigan,
alleging that two dance clubs-Cin-Lan, Inc., and
Déjà Vu Consulting, Inc.-misclassified them as
non-employees or independent contractors in violation of the
FLSA and the Michigan Minimum Wage Act. Over the next three
years, the parties engaged in extensive discovery and motion
practice. After more than six months of negotiations, they
entered into a settlement agreement that provided the dancers
monetary compensation and injunctive relief. The district
court approved the settlement ("Cin-Lan
Settlement") and retained jurisdiction to ensure its
enforcement. Doe v. Cin-Lan, Inc., No. 08-CV-12719,
2011 WL 13266312 (E.D. Mich. July 15, 2011).
March 10, 2016-five years after the approval of the
Cin-Lan Settlement-another dancer ("Jane Doe
1") filed a complaint against Déjà Vu
Consulting, its affiliate dance clubs, and its owner Harry
Mohney (collectively, "Déjà Vu") in
the Eastern District of Michigan. Jane Doe 1 filed the
complaint as both a class action under Federal Rule of Civil
Procedure 23 and a collective action under 29 U.S.C. §
216(b) of the FLSA, seeking to bring the action on behalf of
herself and "[a]ll exotic dancers who worked for
Defendants and were misclassified by Defendants as
independent contractors at any time in the past three
years" (collectively, "the Dancers").
(Compl., R. 1, PageID 24-25 (italics in original).) This
lawsuit involves the same class counsel, many of the same
dancers, one of the same defendants, and similar claims as
the initial Cin-Lan dispute. Specifically, the
Dancers allege that Déjà Vu's clubs
violated the FLSA and state wage-and-hour laws by
"intentionally misclassif[ying] class members as
independent contractors, refus[ing] to pay minimum wage,
unlawfully requir[ing] employees to split gratuities, and
unlawfully deduct[ing] employee wages through rents, fines,
and penalties." (Op. & Order, R. 77, PageID
Vu filed a motion to dismiss or stay proceedings in favor of
arbitration on September 16, 2016, and it attached a copy of
Jane Doe 1's Dancer Performance Lease agreement, which
included a clause mandating binding individual arbitration
for all claims arising out of her performances.
the district court made any rulings on the merits, the
parties began negotiating a settlement agreement. On December
28, 2016, the Dancers' attorneys notified the court that
they had "executed a tentative term sheet on a
settlement." (Mot. to Transfer Case, R. 22, PageID 445.)
Additionally, the Dancers filed a motion requesting an
intra-district transfer of the case to the same judge who
retained jurisdiction over the Cin-Lan settlement,
both because the case invokes his continuing jurisdiction and
because he was "intimately familiar with the facts and
circumstances of the parties' dispute after presiding
over the prior case for approximately four years."
(Id. at PageID 446.) On January 4, 2017, the
district court granted the motion to transfer.
negotiation, the parties reached a settlement agreement
("Settlement Agreement"). In exchange for releasing
their claims against Déjà Vu, the Settlement
Agreement provides the Dancers with injunctive and monetary
injunctive relief is structured around the Settlement
Agreement's requirement that every club provide its
current dancers with an Entertainer Assessment Form. This
assessment determines whether the dancer should be classified
as an employee or an Independent Professional Entertainer
("IPE"), the latter of which is akin to an
independent contractor. The Settlement Agreement requires
dancers to complete the assessment before they can perform at
any of Déjà Vu's clubs. The assessment must
then be verified by the club's Certified Public
remaining injunctive relief turns on whether the assessment
determines the dancer in question is an employee or an IPE.
Under the Settlement Agreement, employees may be required to
tip-out or tip-pool with the club's other employees, but
they must be paid minimum wage (or, where available, at the
tip-credited wage). Employees will also be entitled to
commissions of at least 20% of their dance fees that exceed
the cost of employment, as well as 20% commissions of their
sale of 'conversation beverages,' which are drinks
that dancers persuade customers to buy for them. Employees
will be reimbursed by the club for all license and permit
fees required to perform at the club, and the club will
provide them with two logo costumes per month to wear while
working. In contrast, the Settlement Agreement prevents
Déjà Vu from imposing any work schedule upon
IPEs or requiring IPEs to tip-out or tip-pool with any
employee. IPEs also cannot be required to wear any costume.
Finally, IPEs will have the right to vote in each club's
annual IPE meeting to change or modify any club policy that
affects IPEs, which ensures that they have sufficient control
over the clubs' operations to prevent Déjà
Vu from exerting employer-employee control over IPEs.
respect to monetary relief, the Settlement Agreement divides
a total award of $6.55 million into three primary categories:
$1 million toward the Net Cash Payment Settlement Fund
("the cash pool"), $4.5 million toward Secondary
Pool Remuneration ("the secondary pool"), and $900,
000 in attorneys' fees.
first two categories serve as alternative forms of monetary
relief for the class members. The first option is to receive
a one-time payment from the cash pool. The $1 million cash
pool includes $30, 000 in Enhancement Payments for the named
plaintiffs and $50, 000 to pay defendants' Administration
Costs. After subtracting these costs, the total cash pool to
be split between all of the Dancers who elect to receive a
one-time direct payment is $920, 000. Cash pool funds will be
allocated on a point-based system that favors dancers who
worked for the clubs for a longer period of time, as well as
dancers who worked more recently at Déjà
second option is to collect settlement funds from the
secondary pool in the form of credits that can be used at
Déjà Vu clubs. This is the default form of
relief for Dancers who do not opt into the cash pool: each
time a class member performs at one of Déjà
Vu's clubs, credits from the secondary pool will either
cover 60% of her daily rent at the club or allow her to
collect up to $100 in dance fees. Depending on how many
months the dancer has performed at the Déjà Vu
club where she collects the credits, the total amount of
money she can recuperate from the secondary pool is capped at
$200, $1, 000, or $2, 000.
the Settlement Agreement provides compensation for the
Dancers' attorneys. Under the Settlement Agreement,
Déjà Vu agrees not to oppose an award of up to
$900, 000 in direct attorneys' fees. Déjà
Vu also agrees not to oppose an award of up to $300, 000 in
indirect attorneys' fees to be paid out of the
Dancers' secondary pool. The Settlement Agreement
establishes that the indirect fees are to be calculated based
on 33.3% of the value of the redeemed portion of the
secondary pool. These indirect fees are designed to encourage
the Dancers' counsel to try and shore up as much
participation as possible in the secondary pool by creating a
"direct financial incentive" for their
work. (Déjà Vu Br. 64 (italics in original).)
19, 2017, the district court approved the Settlement
Agreement. In finding that the parties satisfied their burden
to show that the Settlement Agreement was fair, the district
court turned to International Union, UAW, et al. v.
General Motors Corp.,497 F.3d 615, 631 (6th Cir. 2007)
("UAW"), which established a set of
factors to determine the fairness of class action
settlements. In particular, the court stressed the first
factor-the comparison between the relief offered in the
Settlement Agreement and the Dancers' likelihood of
success on the merits against Déjà Vu. The
court emphasized the "high risk of continued litigation
and the uncertain likelihood of success on the merits"
for the Dancers, finding that without the Settlement
Agreement, "the vast majority of class members would
recover nothing." (Op. & Order, R. 77, PageID 4212,
4221.) The court also found that the Settlement Agreement
"offers value to the class in the form of cash,
rent-credit or dance-fee payments, and long-term structural
changes to Defendants' business practices, all of which
directly benefit class members." (Id. at PageID
4212.) After ...