Megan Steahle, on behalf of herself and all others similarly situated v. CarGroup Holdings, LLC

Summary

The Eastern District of Pennsylvania denied without prejudice Plaintiff Megan Steahle’s unopposed motion for preliminary approval of a revised hybrid FLSA collective and Rule 23 class action settlement. The court found that the proposed settlement improperly proceeded solely on an opt-out basis, failed to allocate settlement proceeds between the FLSA and state-law claims, and was unclear in its application of the Third Circuit’s decision in Lundeen. The parties were granted 21 days to revise the settlement and plaintiff’s counsel was ordered to submit a statement of hours worked.

Holdings

1. A proposed settlement resolving both FLSA collective claims and Rule 23 class claims cannot be preliminarily approved when it proceeds solely on an opt-out basis and does not provide an FLSA opt-in procedure.
2. A settlement resolving FLSA collective claims and Rule 23 state-law class claims must specify how settlement proceeds will be divided between the two categories of claims and must provide separate opt-in and opt-out procedures.
3. The proposed revised settlement could not receive preliminary approval because its terms were confusing and unclear concerning which employees released FLSA claims, what claims each employee would be paid for, and what actions employees needed to take to preserve or release claims.

Questions Presented

1. Whether the proposed hybrid FLSA collective and Rule 23 class action settlement could receive preliminary approval while proceeding solely on an opt-out basis.
2. Whether preliminary approval was proper when the settlement did not specify how settlement proceeds would be divided between the FLSA claims and the state-law class claims.
3. Whether the proposed settlement was sufficiently clear and consistent with Lundeen to satisfy Rule 23(e)(2), particularly regarding the release of unasserted FLSA claims and the options available to class members.

Disposition

other