Davis v. J.P. Morgan: $42 Million Settlement of Unpaid Overtime Claims Approved

A district court has granted final approval of a remarkable $42 million settlement against J.P. Morgan Chase bank.  In Davis v. J.P. Morgan Chase & Co., the plaintiffs alleged that the defendant had misclassified loan underwriters as “managers,” and thus impermissibly failed to pay them overtime wages as required by the federal Fair Labor Standards Act (FLSA).  Davis v. J.P. Morgan Chase & Co., No. 01-CV-6492L, 2011 U.S. Dist. LEXIS 117082 (W.D. N.Y. Oct. 11, 2011) (available here).  Class members now stand to recover as much as $94,625 each in compensation from the settlement.  The Court also approved attorneys’ fees in the amount of $14 million dollars, or one-third of the $42 million common fund.  Id. at *10-11.

Emphasizing that class counsel obtained a “very sizable” recovery for the class, the Court found that the $14 million award was justified.  Id. at *33.  The parties relied upon the “percentage method” for awarding fees, “i.e., basing the calculation of attorneys’ fees on a percentage of the fund secured by counsel, rather than using the traditional ‘lodestar’ approach of multiplying an hourly rate by the number of hours reasonably expended.”  Id. at *26-29.  Though the percentage method is commonly used in the Second Circuit, the Court cross-checked the requested attorneys’ fees “’by dividing the proposed fee award by the lodestar calculation, resulting in a lodestar multiplier.’”  Id. at *26-29 (citing In re AT & T Corp., 455 F.3d 160, 164 (3d Cir. 2006)).  Finding a multiplier of 5.3, the Court acknowledged that this is “toward the high end of acceptable multipliers,” but “not atypical.”  Id. 

The Court further observed that any reduction in attorneys’ fees would not benefit the class.  Id. at *24.  “[I]f the Court awards less than one third of the settlement fund as attorney’s fees, that will not increase the amount paid to class members; it will simply decrease the amount paid by defendants.”  Id.  The Court took a similarly pragmatic view in rejecting any analysis of class members’ maximum potential recovery.  The Court wrote that “any dollar figure assigned as the maximum potential aggregate recovery by plaintiffs would mean little, and would not provide a particularly useful benchmark for measuring the reasonableness of the settlement,” because plaintiffs may have had little realistic chance of actually recovering that theoretical sum.  Id. at *12-14.

In approving this settlement, the Davis court substantially deferred to the parties’ negotiated settlement terms, and took a pragmatic, real-world approach.  The Court also underscored the value of the percentage method in tying the recovery of class counsel to that of class members.