Carnival Class Action Defense Case-Borcea v. Carnival: Florida Federal Court Approves Settlement Of Employment Law Class Action

Mar 8, 2007 | By: Michael J. Hassen

Terms of Proposed Class Action Settlement of Employee Claims Against Carnival Found to be Fair, Adequate and Reasonable by Florida Court

Putative class actions were filed against Carnival by former employees on behalf of several thousand workers alleging that Carnival manipulated employee time records and deprived employees of wages due; the class actions sought unpaid wages, attorney fees and costs, penalty wages, and injunctive relief. Borcea v. Carnival Corp., 238 F.R.D. 664, 667-68 (S.D. Fla. 2006). After extensive motion practice, and while one of the class actions was on appeal following a district court order dismissing the class action with prejudice, the parties agreed upon terms for a settlement and presented the proposal to the district court for approval. Id., at 668. The district court approved the proposed settlement, finding the terms to be fair, adequate and reasonable. The terms of the class action settlement are extensive and detailed. We summarize here only the district court’s legal conclusions in approving the resolution of the class actions; the reader is encouraged to review the opinion itself for details of the settlement. See id., at 668-72.

In considering the motion, the district court observed that while any proposed class action settlement requires court approval, see FRCP Rule 23(e), there is “a strong judicial policy in favor of settlement” and in the Eleventh Circuit a settlement “should be approved as long as it is ‘fair, adequate and reasonable and it is not the product of collusion between the parties.’” Borcea, at 672 (quoting Bennett v. Behring Corp., 737 F.2d 982, 986 (11th Cir. 1984)). The district court summarized the factors it considers in determining whether the proposed class action settlement is fair, adequate and reasonable as follows: “(1) the likelihood of success at trial; (2) the range of possible recovery; (3) the point on or below the range of possible recovery at which a settlement is fair, adequate and reasonable; (4) the complexity, expense and duration of litigation; (5) the substance and amount of opposition to the settlement; and (6) the stage of proceedings at which the settlement was achieved. Id., at 672-73 (citation omitted).

The district court also recognized its duty to “independently determine whether this case meets the requirements for class certification under Federal Rule of Civil Procedure 23(a) and 23(b), even if the certification is only for settlement purposes,” Borcea, at 676; accordingly, the court analyzed each of the requirements of Rule 23(a) and concluded that elements of numerosity, commonality, typicality and adequacy of representation were met and that the predominance and superiority elements of Rule 23(b)(3) were satisfied, id., at 676-77.

In analyzing whether the terms of the class action settlement were fair, adequate and reasonable, the district court began by examining the likelihood of success at trial because “the benefit this settlement provides to the class should be compared with the likely recovery for the class at trial.” Borcea, at 673 (citation omitted). If there are strong defenses to the class action, then even defense payment of minimal amounts in settlement may be reasonable. Id. In this case, one of the class actions had been dismissed with prejudice and “faced the significant risk of this dismissal being upheld on appeal,” and the other class action faced several hurdles at the district court level. Id. Given these circumstances, the fact that Carnival agreed to pay $6,250,000 to the class and that every participating class member will receive some recovery weighed in favor of approval of the settlement. Id.

The district court next addressed the complexity of the case, and the “significant benefit” the class would realize from the “relatively rapid litigation and settlement of this case.” Borcea, at 674. Additionally, the settlement was reached only after the parties “had engaged in extensive investigation of the claims and defenses and had a reasonable opportunity to explore the risks involved,” id., at 675. As the court explained at page 675, “Thus, the stage of the proceedings at which the settlement was reached was sufficient to enable class counsel to fully investigate the strength of the claims and reasonably evaluate the risks and expenses facing the parties if a settlement were not reached.”

The district court also found persuasive the fact that only six objections were filed to the settlement, five of which were identical objections by class members who did not seek to be excluded from the class and, to the contrary, expressed a desire to participate in receiving a portion of the settlement proceeds if the settlement was approved. Borcea, at 674. The district court then found the sole remaining objection to be untimely and meritless, id., at 675. The court also found that there was no evidence to suggest that the settlement was not the product of arm’s length negotiations and that it provided a substantial benefit to the class. Id., at 675-76. Accordingly, the district court certified a class for settlement purposes and approved the settlement agreement. Id., at 677-78.

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