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Peck v. Air Evac EMS, Inc.

United States District Court, E.D. Kentucky, Central Division, Lexington

June 5, 2019

JASON PECK, et al., Plaintiff,


          Matthew A Stinnet Judge.

         This matter is before the Court on Plaintiff Jason Peck's (“Peck”), individually and on behalf of those similarly situated, unopposed Motion for Class Certification and Preliminary Approval of Class Action Settlement. [DE 20]. For the reasons stated herein, the Court recommends the District Court certify the class and preliminarily approve the settlement.

         I. BACKGROUND

         A. Factual and Procedural Background

         Peck filed this action on behalf of both current and former flight paramedics and nurses employed by Defendant Air Evac EMS, Inc. (“Air Evac”), an air ambulance company. Peck alleges Air Evac had a practice of unlawfully deducting “sleep time” from employees' overtime pay. For example, according to Peck, Air Evac's policy required some of the putative class members to work seven consecutive 12-hour shifts (for a total of 84 hours) in a seven-day period but did not pay overtime unless the employee worked more than seven shifts in a seven-day period. [DE 1-1 at Page ID # 13 (Complaint ¶¶ 16-18)]. Peck claims other employees worked 24-hour shifts but were not paid overtime unless they worked more than four 24-hour shifts in a two-week period. [DE 1-1 at Page ID # 13 (Complaint ¶ 19)]. As a result, Peck and the putative class members (“Class Members”) were not compensated for all hours, including sleep time, and worked in excess of forty (40) hours per week, in violation of the Kentucky Wage and Hour Act (“KWHA”). KRS 337.285.

         Peck filed this lawsuit in Fayette Circuit Court on October 25, 2018, and Air Evac removed to this Court based on diversity jurisdiction and the Class Action Fairness Act. [DE 1]; 28 U.S.C. § 1446; 28 U.S.C. § 1332(d). In the companion case, Day et al. v. Air Methods Corp., the District Court held that air ambulance companies are not exempt from the KWHA. Day et al. v. Air Methods Corp., 2017 WL 4781863 (E.D. Ky. Oct. 23, 2017). The result was that Air Evac in this matter would likely be found liable for unpaid overtime, including unpaid “sleep time.” Consequently, the parties in this case determined mediation would be mutually beneficial in reaching a resolution of this matter. [DE 20-1 at Page ID # 110].

         Both parties utilized the services of an expert to analyze payroll and time data for current and former Kentucky employees of Air Evac. The analysis included consideration of class data to determine potential damages, including back pay, liquidated damages, employment benefits, interest, attorney's fees, and any other damages. The estimates provided by these experts of unpaid wages due to the putative class differed by less than two percent. [DE 20-1 at Page ID # 111].

         For purposes of settlement, Air Evac has conceded that class certification is appropriate. [DE 20-1 at Page ID # 112]. However, the Court will conduct a full analysis of the prerequisites for class certification under Rule 23(a) and (b) as well as the new requirements for preliminary settlement approval under 23(e).

         B. Summary of Proposed Settlement

          The parties ultimately negotiated a settlement with the assistance of a mediator (“Settlement”). [DE 20-1 at Page ID # 109]. The Settlement provides for a maximum Gross Settlement Fund of $3, 000, 000, which includes up to $800, 000 in attorneys' fees and costs and a $15, 000 incentive to Peck.

         The proposed settlement class (the “Class”) is defined as:

All persons currently or formerly employed by AEL in the Commonwealth of Kentucky as a flight nurse, flight paramedic, or pilot at any time during the Class Period, which is October 25, 2013 through preliminary approval.

[DE 20-1 at Page ID # 112]. Air Evac has produced records that Peck has analyzed, and the parties agree that the class definition includes 428 current and former employees. The settlement proposes that Air Evac pay the Gross Settlement Fund of $3, 000, 000 into a settlement fund that will be distributed by a third-party administrator Rust Consulting, Inc. (the “Administrator”). The Net Settlement fund from which the Class Members who do not Opt-out will be paid the Gross Settlement Fund minus the attorneys' fees and costs and the incentive Peck (the “Settlement”). The Administrator's fee will be paid by Air Evac in addition to the Net Settlement Amount.

         The Administrator will be responsible for reaching Class Members. The Settlement Agreement requires the Administrator to finalize and mail the Notice to Class Members (the “Notice”) and Opt-out to each individual who is a member of the Class; maintain a static website where the Notice can be downloaded; and independently respond to the inquiries of class members regarding relevant procedures. [DE 20-1 at Page ID # 113]. Air Evac will provide the list of Class Members from its records. The Administrator will attempt to locate a current address for any Class Member whose mail is returned as undeliverable and will re-send the Notice and Opt-out to such an address where possible. For Class Members who do not timely submit a request to opt-out of the action, their claims will be released and barred once the Settlement is final.

         Plaintiff's Counsel will petition the Court for attorneys' fees and costs of up to $800, 000, which is approximately twenty-six percent of the Gross Settlement Fund. Individual payments to Class Members will be calculated based upon Air Evac's time and payroll records. Class Members will be fully compensated for their unpaid overtime during the relevant time period. The individually calculated payments are set forth in Exhibit A-1 to the proposed Settlement Agreement filed with Peck's unopposed motion. [DE 20-2 at Page ID # 151-61].


         Fed. R. Civ. P. 23 governs class action lawsuits. Subsection (e) was modified in December 2018 to require parties to submit additional information so that the Court may preliminarily approve a settlement prior to notice being sent to Class Members. Rule 23(e) now employs a two-step approval process that requires the court: (1) to approve the sending of notice to class members under subdivision (e)(1) and (2) to then hold a hearing and approve the proposed settlement under subdivision (e)(2). This two-step process applies even where, as here, the class has not been certified. In such a circumstance, the Advisory Committee noted that the “notice required under Rule 23(e)(1) then should also satisfy the notice requirements of amended Rule 23(c)(2)(B) for a class to be certified under Rule 23(b)(3), and trigger the class members' time to request exclusion. Information about the Opt-out rate could then be available to the court when it considers final approval of the proposed settlement.” Fed.R.Civ.P. 23(e)(2) Advisory Committee's Note (2018 Amendment).

         To effectuate this process, a court must “frontload” its analysis by considering many of the same factors at the initial notice stage that it will consider at the later approval stage. Consistent with the new rule and as part of this first step, the Court will analyze whether the Court “will likely be able to: (i) approve the proposal under Rule 23(e)(2); and (ii) certify the class for purposes of judgment on the proposal.” If both of those questions are answered in the affirmative, the Court will consider whether the proposed method of giving notice satisfies Rule 23(c)(2)(B).

         III. ANALYSIS

         A. Approval of Settlement Pursuant to Rule 23(e)(2)

         The amendments to Rule 23(e) set forth a list of specific factors and issues for courts to consider in deciding whether a settlement is “fair, reasonable, and adequate” such that courts may approve the sending of notice and the proposed settlement. Under this new rubric, the Court must examine four issues: (1) whether the proposed class was adequately represented; (2) whether the proposed settlement was reached through an arm's length negotiation; (3) the proposed relief to the class is adequate; and (4) whether the proposed settlement treats class members equitably. The Court will address each of these factors, in turn, below.

         Moreover, the Advisory Committee made clear that “[t]he goal of this amendment is not to displace any factor [developed by the circuit courts], but rather to focus the court and the lawyers on the core concerns of procedure and substance that should guide the decision whether to approve the proposal.” Fed.R.Civ.P. 23(e)(2) Advisory Committee's Note (2018 Amendment). Accordingly, in addition to analyzing the new factors set forth in Rule 23(e)(2), the Court will analyze the relevant Sixth Circuit factors.

         1. Rule 23(e)(2) Factors

          a. Adequate Representation and Arm's Length Negotiation

         Regarding these first two factors, the Advisory Committee offered the following guidance:

These paragraphs identify matters that might be described as “procedural” concerns, looking to the conduct of the litigation and of the negotiations leading up to the proposed settlement. . . .
The information submitted under Rule 23(e)(1) may provide a useful starting point in assessing these topics. For example, the nature and amount of discovery in this or other cases, or the actual outcomes of other cases, may indicate whether counsel negotiating on behalf of the class had an adequate information base. The pendency of other litigation about the same general subject on behalf of class members may also be pertinent. The conduct of the negotiations may be important as well. For example, the involvement of a neutral or court-affiliated mediator or facilitator in those negotiations may bear on whether they were conducted in a manner that would protect and further the class interests.

Fed. R. Civ. P. 23(e)(2) Advisory Committee's Note (2018 Amendment). The Court, based upon the record, finds no dispute related to the representation and negotiations in this matter.

         Namely, counsel for Peck (and proposed lead class counsel) is an experienced class action litigator. The decision to settle the current dispute was made after an exhaustive review of payroll records and other information by competing experts. Considering the prior ruling in the companion case of Day v. Air Methods Corp. in which plaintiffs' counsel is the same, the parties rightly focused on the amount of possible damages and were able to ...

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