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CASE 0:06-cv-03093-JRT-FLN Document 346 Filed 08/16/11 Page 1 of 53

UNITED STATES DISTRICT COURT

DISTRICT OF MINNESOTA

IN RE RBC DAIN RAUSCHER
OVERTIME LITIGATION

MASTER FILE: 06-03093 JRT-FLN

MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFFS’ UNOPPOSED

MOTION FOR PRELIMINARY APPROVAL OF PROPOSED

CLASS AND COLLECTIVE ACTION SETTLEMENT

CASE 0:06-cv-03093-JRT-FLN Document 346 Filed 08/16/11 Page 2 of 53

TABLE OF CONTENTS

I.

II.

III.

IV.

INTRODUCTION ....................................................................................................1

FACTUAL AND PROCEDURAL BACKGROUND .............................................3

A.

B.

Description of the Litigation .........................................................................3

Settlement Negotiations.................................................................................8

TERMS OF THE PROPOSED SETTLEMENT....................................................11

THE COURT SHOULD GRANT PRELIMINARY APPROVAL TO THE
SETTLEMENT.......................................................................................................16

A.

B.

The Proposed Settlement is Entitled to an Initial Presumption of Fairness 16

The Eighth Circuit’s Standards Governing Class Action Settlements........20

1. The Merits of Plaintiffs’ Case When Weighed Against the Settlement

Terms Favor Approval of the Proposed Settlement...............................21

a. The Merits of Plaintiffs’ Case...........................................................21

b. The Terms of the Stipulation Favor Preliminary Approval .............23

2. Defendant’s Financial Condition ...........................................................24

3. The Complexity and Further Expense of Continued Litigation Weighs

in Favor of the Proposed Settlement......................................................24

V.

THE COURT SHOULD CERTIFY THE CLAIMS OF THE CLASS..................26

A. The Class May Be Properly Certified Under Rule 23(a) for Settlement ........
Purposes Only..............................................................................................29

1. Rule 23(a)(1)—“Numerosity” ...............................................................29

2. Rule 23(a)(2)—“Commonality” ............................................................30

3. Rule 23(a)(3)—“Typicality”..................................................................31

4. Rule 23(a)(4)—“Adequacy of Representation”.....................................33

i

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B.

C.

The Class May Be Properly Certified Under Rule 23(b) for Settlement
Purposes Only..............................................................................................33

The Class Satisfies the Requirements of 29 U.S.C. § 216(b)......................36

VI.

THE PROPOSED NOTICE PLAN........................................................................37

VII. THE PLAN OF ALLOCATION ............................................................................40

VIII. CONCLUSION.......................................................................................................42

ii

CASE 0:06-cv-03093-JRT-FLN Document 346 Filed 08/16/11 Page 4 of 53

TABLE OF AUTHORITIES

Page(s)

FEDERAL CASES
In re “Agent Orange” Prod. Liab. Litig.,

818 F.2d 145 (2d Cir. 1987).........................................................................................30

Amchem Prods., Inc. v. Windsor,

521 U.S. 591 (1997) .........................................................................................27, 34, 35

Arkansas Educ. Ass’n v. Bd. of Educ.,

446 F.2d 763 (8th Cir. 1971)........................................................................................29

Armstrong v. Bd. of Sch. Dirs.,

616 F.2d 305 (7th Cir. 1980)............................................................................17, 20, 27

Babcock v Computer Assocs. Int’l, Inc.,

212 F.R.D. 126 (E.D.N.Y. 2003).......................................................................... 34

In re BankAmerica Corp. Secs. Litig.,

210 F.R.D. 694 (E.D. Mo. 2002) .................................................................................24

Bowling v. Pfizer, Inc.,

143 F.R.D. 141 (S.D. Ohio 1992) ................................................................................27

Buchet v. ITT Consumer Fin. Corp.,

845 F. Supp. 684 (D. Minn. 1994) ...............................................................................18

Carnegie v. Household Int’l, Inc.,

376 F.3d 656 (7th Cir. 2004)...................................................................................................26

Carson v. Am. Brands, Inc.,

450 U.S. 79 (1981) .................................................................................................18, 20

In re Charter Commc’ns, Inc. Secs. Litig.,

No. 02-CV-1186, 2005 WL 4045741 (E.D. Mo. June 30, 2005) ....................17, 20, 25

Chatelain v. Prudential-Bache Secs., Inc.,

805 F. Supp. 209 (S.D.N.Y. 1992)...............................................................................18

City of Detroit v. Grinnell Corp.,

495 F.2d 448 (2d Cir. 1974).........................................................................................18

iii

CASE 0:06-cv-03093-JRT-FLN Document 346 Filed 08/16/11 Page 5 of 53

City P’ship Co. v. Atl. Acquisition Ltd. P’ship,

100 F.3d 1041 (1st Cir. 1996) ......................................................................................19

Consol. Rail. Corp. v. Town of Hyde Park,

47 F.3d 473 (2d Cir. 1995)...........................................................................................29

Cotton v. Hinton,

559 F.2d 1326 (5th Cir. 1977)......................................................................................17

Crenshaw v. Maloney,
13 Fair Emp’t Practice Cases (BNA) (D. Conn. May 6, 1976).........................................29

Cruz v. Lawson Software, Inc.,

764 F. Supp. 2d 1050 (D. Minn. 2011) ........................................................................22

Cypress v. Newport News Gen. & Nonsectarian Hosp. Ass’n,

375 F.2d 648 (4th Cir. 1967)........................................................................................29

DeBoer v. Mellon Mortg. Co.,

64 F.3d 1171 (8th Cir. 1995)........................................................................................32

In re Diebold ERISA Litig.,

No. 06-cv-170 (N.D. Ohio) ....................................................................................................28

Farthing v. United Healthcare of the Midwest, Inc.,

No. 98-cv-4, 2000 U.S. Dist. LEXIS 21995 (W.D. Mo. 2000) ...................................32

Forbush v. J.C. Penney Co., Inc.,

994 F.2d 1101 (5th Cir. 1993)......................................................................................30

Glass v. UBS Fin. Servs., Inc.,

No. 06-4068, Slip Op. (N.D. Cal. Aug. 25, 2006) .......................................................28

In re Global Crossing Secs. & ERISA Litig.,

225 F.R.D. 436 (S.D.N.Y. 2004) .....................................................................24, 29, 32

Grunin v. Int’l House of Pancakes,

513 F.2d 114 (8th Cir. 1975)..................................................................................20, 21

In re IBP, Inc. Secs. Litig.,

328 F. Supp. 2d 1056 (D.S.D. 2004)............................................................................24

Janney Montgomery Scott LLC Fin. Consultant Litig.,

No. 06-cv-3202, Slip Op. (E.D. Pa. Feb. 9, 2009) .......................................................29

iv

CASE 0:06-cv-03093-JRT-FLN Document 346 Filed 08/16/11 Page 6 of 53

Lerwill v. Inflight Motion Pictures, Inc.,

582 F.2d 507 (9th Cir. 1978)........................................................................................35

Little Rock Sch. Dist. v. Pulaski Cnty. Special Sch. Dist. No. 1,

921 F.2d 1371 (8th Cir. 1990)................................................................................17, 27

Local Joint Exec. Bd. of Culinary/Bartender Trust Fund v. Las Vegas Sands, Inc.,

244 F.3d 1152 (9th Cir. 2001), cert. denied, 534 U.S. 973 (2001)..............................34

Lockwood Motors, Inc. v. Gen. Motors Corp.,

162 F.R.D. 569 (D. Minn. 1995)............................................................................30, 35

Lynch v. United Servs. Auto. Ass’n,

491 F. Supp. 2d 357 (S.D.N.Y. 2007)..........................................................................36

Marisol A. v. Guiliani,

126 F.3d 372 (2d Cir. 1997).........................................................................................30

Mathers v. Northshore Mining Co.,

217 F.R.D. 474 (D. Minn. 2003)..................................................................................33

In re Minolta Camera Prods. Antitrust Litig.,

668 F. Supp 456 (D. Md. 1987) ...................................................................................18

Mullane v. Cent. Hanover Bank & Trust Co.,

339 U.S. 306 (1950) .....................................................................................................37

Nadeau v. Wells Fargo Bank, Nat’l Ass’n,

No. 10-CV-4356, 2011 WL 1633131 (D. Minn. Apr. 26, 2011)...........................28, 30

Nerland v. Caribou Coffee Co., Inc.,

564 F. Supp. 2d 1010 (D. Minn. 2007) ........................................................................32

Newman v. Stein,

464 F.2d 689 (2d Cir. 1972).........................................................................................23

Officers for Justice v. Civil Serv. Comm’n,

688 F.2d 615 (9th Cir. 1982), cert. denied, 459 U.S. 1217 (1983)..............................28

In re Oxford Health Plans, Inc., Secs. Litig.,

191 F.R.D. 369 (S.D.N.Y. 2000) .................................................................................32

In re PaineWebber Ltd. P’ships Litig.,

171 F.R.D. 104 (S.D.N.Y. 1997) .................................................................................19

v

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Paxton v. Union Nat’l Bank,

688 F.2d 552 (8th Cir. 1982)............................................................................29, 30, 31

In re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions,

148 F.3d 283 (3d Cir. 1998)...................................................................................34, 35

In re Prudential Secs. Inc. Ltd. P’ships Litig.,

164 F.R.D. 362 (S.D.N.Y. 1996) .................................................................................37

In Re RBC Dain Rauscher Overtime Litigation,
(D. Minn. Case No. 06-03093 JRT-FLN) ...................................................................................5,6

Robidoux v. Celani,

987 F.2d 931 (2d Cir. 1993)...................................................................................29, 32

Robin Drug Co. v. PharmaCare Mgmt. Servs., Inc.,

No. 03-cv-3397, 2004 WL 1088330 (D. Minn. May 13, 2004)...................................35

Scholtisek v. Eldre Corp.,

229 F.R.D. 381 (W.D.N.Y. 2005)................................................................................36

Simel v. JP Morgan Chase & Co.,

No. 05-cv-9750 (S.D.N.Y.) .....................................................................................................27

Smith v. United Healthcare Servs.,

No. 00-CV-1163, 2002 WL 192565 (D. Minn. Feb. 5, 2002) .....................................31

Steinberg v. Morgan Stanley & Co.,

No. 06-2628, Slip. Op. (S.D. Cal. Jan. 8, 2008)...........................................................29

Stevens v. Safeway, Inc.,

No. 05-01988, 2008 U.S. Dist. LEXIS 17119 (C.D. Cal. Feb. 25, 2008)....................28

In re Traffic Exec. Ass’n.–E. R.Rs.,

627 F.2d 631 (2d Cir. 1980).........................................................................................19

In re UnitedHealth Group Inc. Shareholder Derivative Litig.,

631 F. Supp. 2d 1151 (D. Minn. 2009) ........................................................................19

Van Horn v. Trickey,

840 F.2d 604 (8th Cir. 1988)..................................................................................18, 20

In re Visa Check/Mastermoney Antitrust Litig.,

297 F. Supp. 2d 503 (E.D. N.Y. 2003).........................................................................18

vi

CASE 0:06-cv-03093-JRT-FLN Document 346 Filed 08/16/11 Page 8 of 53

Wal-Mart Stores, Inc. v. Dukes,

131 S. Ct. 2541 (2011) .................................................................................................30

Weigner v. City of N.Y.,

852 F.2d 646 (2d Cir. 1988).........................................................................................37

Weinberger v. Kendrick,

698 F.2d 61 (2d Cir. 1982)...........................................................................................17

White v. Baptist Mem’l Health Care Corp.,

No. 08–2478, 2011 WL 1883959 (W.D. Tenn. May 17, 2011)...................................23

White v. NFL,

836 F. Supp. 1458 (D. Minn. 1993) .............................................................................17

Wiener v. Roth,

791 F.2d 661 (8th Cir. 1986)........................................................................................17

In re Wireless Tel. Cost Recovery Fees Litig.,

No. 03-MD-015, 2004 WL 3671053 (W.D. Mo. Apr. 20, 2004) ................................24

In re WorldCom, Inc. Secs. Litig.,

219 F.R.D. 267 (S.D.N.Y. 2003) .................................................................................29

Zivali v. AT & T Mobility, LLC,

No. 08 Civ. 10310, 2011 WL 1815391 (S.D.N.Y. May 12, 2011)..............................22

In re Zurn Pex Plumbing Prods. Liability Litig.,

267 F.R.D. 549 (D. Minn. 2010)..................................................................................30

FEDERAL: STATUTES, RULES, REGULATIONS, CONSTITUTIONAL PROVISIONS

28 U.S.C. §1715.................................................................................................................39

29 U.S.C. § 201, et seq. ..............................................................................................passim

29 U.S.C. § 216(b)......................................................................................................passim

Employee Retirement Income Security Act of 1974...........................................................1

FED. R. CIV. P. 23........................................................................................................passim

STATE: STATUTES, RULES, REGULATIONS, CONSTITUTIONAL PROVISIONS

California Labor Code, Industrial Welfare Commission Wage Orders, California

Business and Professions Code......................................................................................1

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Article X, Section 24 of the Florida Constitution............................................................................1

New York Labor Law......................................................................................................................1

OTHER AUTHORITIES
1 Herbert Newberg & Albert Conte, Newberg on Class Actions § 3:05 (2d ed.

1985).......................................................................................................................17, 30

3B Moore's Federal Practice ¶ 23.1.24[2] (2d ed. 1992)...................................................19

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I.

INTRODUCTION1

Plaintiffs Carlos Alvarez, Ana Blumberg-Markus, Susan Capozzoli, Andres Cruz,

Eugene David, Patrick Grattan, Christopher Kennedy, Martin Kulman, Felipe Pazos, and

Alberto Roque (collectively, “Plaintiffs” or “Class Representatives”), on behalf of

themselves and all others similarly situated, respectfully submit this Memorandum of

Law in Support of Unopposed Motion for Preliminary Approval of Proposed Class and

Collective Action Settlement (the “Settlement”).

The Settlement resolves all claims asserted by Plaintiffs against Defendant RBC

Capital Markets, LLC (“RBC” or “Defendant”) for overtime and minimum wage

violations under the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. § 201, et

seq. (“FLSA”), violations of certain provisions of the Employee Retirement Income

Security Act of 1974 as amended (“ERISA”) and violations of various state labor laws,2

and represents the conclusion of over four years of rigorously contested litigation. If

approved, and in exchange for the release of claims described herein and other terms and

conditions of the Stipulation, the Settlement will provide an excellent and significant

benefit to Participating Claimants in the form of a cash payment derived from the gross


Plaintiffs incorporate herein by reference their Joint Stipulation and Settlement
1
Agreement (“Stipulation”) attached to the Declaration of Peter A. Muhic in Support of
Unopposed Motion for Preliminary Approval of Proposed Class and Collective Action
Settlement (“Muhic Declaration”) as Exhibit A. Unless otherwise defined herein, all
capitalized terms used throughout share the meaning ascribed to them in the Stipulation.
The state labor laws at issue in this action include the California Labor Code,
2
Industrial Welfare Commission Wage Orders, California Business and Professions Code,
New York Labor Law, New York State Department of Labor’s Codes, Rules and
Regulations, Article X, Section 24 of the Florida Constitution and the Florida Minimum
Wage Act.

1

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Settlement Consideration of Five Million, Fifty Thousand Dollars and No Cents

($5,050,000.00). Such a compromise is inherently fair, reasonable and adequate under

the governing standards for evaluating class action settlements in the Eighth Circuit given

the litigation risks and challenges present in this case.

Certification, for settlement purposes only, of a class action pursuant to Rule 23 of

the Federal Rules of Civil Procedure and a collective action pursuant to 29 U.S.C. §

216(b) is clearly appropriate as set forth below.3 In addition, the proposed plan for the

dissemination of Class Notice to Members of the FLSA Settlement Class and Members

of the Collective Opt-In Class satisfies the requirements of due process. The Class

Notice will advise Class Members of, among other things, the terms of the Settlement,

how to object to or opt-out of the Settlement, and the date of the Fairness Hearing.

The Settlement was not reached until after comprehensive fact discovery had

taken place, Defendant’s Motions for Summary Judgment were fully briefed, argued and

decided, and Plaintiffs’ conditional collective certification and class certification motions

had been filed, briefed, argued and decided. Each term and detail of the Settlement was

the product of spirited and extensive arm’s-length negotiations.

As explained herein, all prerequisites for preliminary approval of the Settlement,

certification of a class and collective action for settlement purposes only, approval of the

proposed plan of allocation of the Settlement Consideration, and approval of the


While Plaintiffs acknowledge that this Court previously denied their Motion for
3
Class Certification pursuant to Fed. R. Civ. P. 23 on behalf of California, Florida and
New York subclasses, that decision does not preclude certification of a class for
settlement purposes only as set forth more fully in Section V supra.

2

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proposed Class Notice plan have been met. Preliminary approval of the Settlement and

dissemination of Class Notice at this juncture is therefore warranted. Accordingly,

Plaintiffs respectfully request that the Court: (1) grant preliminary approval of the

Settlement; (2) certify, for settlement purposes only, all state law claims that were or that

could have been asserted in the Litigation pursuant to FED. R. CIV. P. 23(a) and (b)(3),

and conditionally certify all federal FLSA claims asserted in the Litigation pursuant to 29

U.S.C. § 216(b); (3) appoint, for settlement purposes only, Plaintiffs Carlos Alvarez, Ana

Blumberg-Markus, Susan Capozzoli, Andres Cruz, Eugene David, Patrick Grattan,

Christopher Kennedy, Martin Kulman, Felipe Pazos, and Alberto Roque as Class

Representatives; (4) appoint, for settlement purposes only, the law firms of Kessler Topaz

Meltzer & Check, LLP, Rose, Klein & Marias, LLP, Thierman Law Firm, Lovell Stewart

Halebian LLP, Berman DeValerio, and Head Seifert & Vander Weide as Class Counsel;

(5) approve AB Data, Ltd. as the Claims Administrator; (6) preliminarily approve the

allocation of the Settlement Consideration presented herein and incorporated in the

proposed Class Notice; (7) approve and authorize the mailing of the Class Notice; and (8)

set a date for a Fairness Hearing.

II.

FACTUAL AND PROCEDURAL BACKGROUND

A.

Description of the Litigation

Prior to filing the initial complaint in this Litigation, Class Counsel conducted a

thorough investigation into Plaintiffs’ claims and allegations. The pre-suit efforts of

Class Counsel included: (i) extensive interviews and meetings with some of the Class

Members; (ii) a review of documents produced by these individuals; and (iii) a review of

3

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publicly-available materials regarding Defendant’s Securities Brokers4. Subsequently,

the Litigation was commenced against RBC on July 24, 2006 in the United States District

Court for the District of Minnesota by two former RBC Securities Brokers5 seeking to

recover unpaid overtime, both individually and on behalf of all other similarly situated

persons, pursuant to the FLSA, along with other state law claims (District of Minnesota

Case No. 06-3093).

On July 27, 2006, California Plaintiff Eugene David filed a lawsuit against RBC in

the Superior Court of California, County of Los Angeles, alleging FLSA overtime claims,

as well as California claims for overtime, illegal deductions from pay, waiting time

penalties, and failure to provide lawful rest and meal breaks (Los Angeles County

Superior Court Case No. BC356065). Plaintiff David (and each of the California

Plaintiffs who filed after him) sought to bring California claims on behalf of a class of all

Securities Brokers and those employed in “similar” positions in California. On October

30, 2006, the Central District of California granted RBC’s motion to transfer venue to the

District of Minnesota.

On October 19, 2006, California Plaintiff Christopher Kennedy, and an individual

who is no longer a party to the Litigation, filed a lawsuit against RBC in the Superior

Court of California, County of Los Angeles, alleging the same California claims as

Plaintiff David (Los Angeles County Superior Court Case No. BC360586). On January


The term “Securities Brokers” includes all persons employed by RBC as Financial
4
Consultants, Senior Financial Associates, Institutional Salespersons and/or Junior
Institutional Salespersons in the United States during the Class Period.
5

These two individuals are no longer parties to the Litigation.

4

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22, 2007, the Central District of California granted RBC’s motion to transfer venue to the

District of Minnesota.

On March 9, 2007, Plaintiff David amended his complaint to add California

Plaintiff Ana Blumberg-Markus. That same day, California Plaintiff Martin Kulman,

along with another individual who is no longer a party to the Litigation, filed an amended

complaint, substituting themselves as named plaintiffs in place of the two individuals

who had originally filed the case.

On May 11, 2007, Magistrate Judge Franklin L. Noel issued Amended Pretrial

Order No. 1 granting Plaintiff Kulman’s motion to consolidate each of the above-

described cases and ordering that the consolidated cases and any action asserting the

same claims then pending or thereafter filed in or transferred to this Court be

consolidated and referred to collectively as In Re RBC Dain Rauscher Overtime

Litigation (District of Minnesota Case No. 06-03093 JRT-FLN). See ECF No. 42. On

May 24, 2007, pursuant to Magistrate Judge Noel’s Amended Pretrial Order No. 1,

Plaintiffs David, Kennedy, Kulman and Blumberg-Markus filed a consolidated amended

complaint in the District of Minnesota (ECF No. 43).

On December 12, 2007, New York Plaintiff Susan Capozzoli filed a complaint

against RBC in the United States District Court for the Southern District of New York,

alleging FLSA overtime claims, as well as claims under New York law for overtime,

illegal deductions from pay, and other common law claims (Southern District of New

York Case No. 07-11200) (the “New York action”). Plaintiff Capozzoli sought to bring

her New York claims on behalf of a class of all Securities Brokers and those employed in

5

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“similar” positions in New York. Pursuant to the parties’ stipulation, the Southern

District of New York transferred the case to the District of Minnesota on March 24, 2008.

On March 6, 2008, Florida Plaintiffs Patrick Grattan, Felipe Pazos, Alberto Roque,

Andres Cruz and Carlos Alvarez filed a complaint against RBC in the United States

District Court for the Southern District of Florida, alleging FLSA overtime claims, as

well as a claim for failure to pay minimum wage under Florida law (Southern District of

Florida Case No. 08-20588) (the “Florida action”). The Florida Plaintiffs sought to bring

their Florida claims on behalf of a class of all Securities Brokers and those employed in

“similar” positions in Florida. Pursuant to the parties’ stipulation, the Southern District

of Florida transferred the case of the District of Minnesota on April 7, 2008.

On July 23, 2008, pursuant to Magistrate Judge Noel’s Pretrial Order No. 2, the

New York action and the Florida action were also consolidated before Judge John R.

Tunheim as part of In Re RBC Dain Rauscher Overtime Litigation (District of Minnesota

Case No. 06-03093 JRT-FLN). Pursuant to the consolidation order, Plaintiffs filed a

second consolidated amended complaint on August 6, 2008. See ECF No. 77. The

complaint alleges fifteen causes of action for failure to pay overtime (Count 1) and

minimum wage (Count 2) in violation of the FLSA, failure to pay overtime (Count 3) and

minimum wage (Count 4) in violation of California law, illegal deductions from

employees’ wages in violation of California law (Count 5), failure to reimburse

employees for necessary expenditures incurred in direct consequence of work duties in

violation of California law (Count 6), failure to comply with deadlines for payment of

wages in violation of California law (Count 7), failure to pay employees within the

6

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proper pay period by paying employees only once per month in violation of California

law (Count 8), failure to provide rest and meal breaks in violation of California law

(Count 9), failure to provide accurate and detailed records of hours worked and wages

earned in violation of California law (Count 10), violations of California’s unfair

competition law resulting from RBC’s violations of the California Labor Code (Count

11), failure to pay overtime in violation of New York law (Count 12), illegal deductions

from employees’ wages in violation of New York law (Count 13), failure to pay

minimum wage in violation of Florida law (Count 14) and causing employees to forfeit

all income within an ERISA deferred compensation plan upon termination of

employment in violation of ERISA and California law (Count 15).

This Litigation has been protracted and vigorously litigated. On October 6, 2008,

following transfer, consolidation, and the filing of the second consolidated amended

complaint, RBC filed an answer and a motion for judgment on the pleadings on the

fifteenth cause of action. See ECF Nos. 85-86. On May 13, 2009, the Court denied

RBC’s motion, concluding that, for purposes of the motion, Plaintiffs’ allegations

identified defendants who allegedly qualified as ERISA fiduciaries with respect to the

disputed plan. The Court also found that the complaint adequately pled a claim that was

not barred by ERISA’s exhaustion requirement. See ECF No. 109.

On June 26, 2009 and July 14, 2009, following extensive discovery practice, RBC

filed motions for summary judgment on the claims of the ten individual named plaintiffs.

See ECF Nos. 114, 119, 124, 129, 133, 139, 150, 155, 160, and 183. On July 7, 2009,

Plaintiffs filed a motion to conditionally certify a collective action and to facilitate notice

7

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to potential plaintiffs pursuant to 29 U.S.C. § 216(b). See ECF No. 171. On July 31,

2009, Plaintiffs filed a motion pursuant to FED. R. CIV. P. 23 for certification of a

California class, a New York class, a Florida class, and an ERISA class. See ECF No.

201.

After full briefing and oral argument, on March 31, 2010, the Court denied the

Class Representatives’ Motion for Class Certification under FED. R. CIV. P. 23, granted

the Class Representatives’ Motion for Conditional Certification of a Collective Action,

granted RBC’s Motion for Summary Judgment as to all claims brought by Florida

Plaintiffs Grattan, Pazos, and Roque, and granted in part and denied in part RBC’s

Motions for Summary Judgment as to the claims brought by each of the other Class

Representatives. See ECF No. 290.

On June 1, 2010, a notice in a form approved by the Court was sent to all similarly

situated individuals, pursuant to the Court’s Order of March 31, 2010. Four hundred and

twenty-three (423) of these individuals filed consent forms to participate in this

Litigation.

Despite their strongly-held differences in opinion regarding the merits of this case,

the parties worked together in a genuine effort to reach a mutually satisfactory settlement

of Plaintiffs’ claims, and after multiple mediation sessions, were able to come to an

agreement on terms described below.

B.

Settlement Negotiations

Prior to reaching the Settlement in this action, the parties had attempted on various

occasions throughout the proceedings to resolve Plaintiffs’ claims. The first such attempt

8

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at a resolution took place during a two-day mediation session in October, 2007 before

Mark A. Buckstein, Esq. Despite making substantial progress at the mediation, the

parties were ultimately unable to come to an agreement.

Subsequent to the initial mediation, the parties continued to engage in discovery

practice and had several discussions regarding whether a second mediation would be

appropriate. In March, 2008, the parties agreed to participate in a second mediation on

April 28, 2008. Consequently, on March 24, 2008, the parties filed a Joint Stipulation to

Stay the Litigation until May 3, 2008 pending the outcome of the second mediation. See

ECF No. 48. The parties agreed to submit a report to the Court upon termination of the

stay regarding whether the second mediation was successful. The Stipulation was

approved on March 25, 2008 (ECF No. 49), and the action was stayed.

Upon termination of the stay, on May 5, 2008, the parties filed a Joint Status

Report with the Court. See ECF No. 69. The parties informed the Court that the

mediation session scheduled for April 28, 2008 had been cancelled due to a motion that

had been filed by counsel in the New York action and counsel in the Florida action on

April 21, 2008 contesting Plaintiffs’ leadership structure (ECF No. 56). The parties noted

that upon the Court’s decision on the leadership motion, they would submit another status

report.

On July 3, 2008, the parties filed a second Joint Status Report informing the Court

that they had conferred and rescheduled the April 28, 2008 second mediation session for

July 16, 2008. See ECF No. 74. The parties stated therein that they would submit a joint

status letter to the Court by July 25, 2008 apprising the Court of the results of the second

9

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mediation.

Prior to the second mediation, Plaintiffs retained a damages expert to develop

various damages analyses, and those analyses were utilized during the second mediation

session before Mr. Buckstein on July 16, 2008. The parties were unable to arrive at an

amicable resolution of this matter during the second mediation and, on November 4,

2008, after the filing of the second consolidated amended complaint on August 6, 2008,

the action was placed back on a litigation track and a revised pretrial scheduling order

was entered. See ECF No. 93.

After completing substantial discovery and motion practice over the course of the

next two years, the parties agreed to participate in a third mediation session on December

6, 2010 before Michael E. Dickstein, Esq. Prior to the mediation, the parties engaged in

an extensive exchange of information and submitted comprehensive briefs to Mr.

Dickstein outlining their positions. Given the voluminous discovery and recent rulings

by the Court, the parties were aware of the strengths and weaknesses of, and the facts

relevant to, their respective legal positions and arguments. On December 6, 2010, Mr.

Dickstein convened an all-day in-person mediation session between the parties. During

the mediation, there was an extensive exchange of information and analyses between the

parties regarding their respective settlement positions, including information regarding

the number of putative class members and damages. The parties reached an agreement to

settle the action during the mediation session on the terms set forth in the parties’ Joint

Stipulation and Settlement Agreement attached to the Muhic Declaration as Exhibit A.

Although Defendant denies any allegations of wrongdoing and liability, and has

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asserted numerous defenses to both liability and collective and class certification, it

nevertheless desires to settle all claims that are asserted in this case in order to avoid the

burden, expense, and uncertainty of continued litigation.

III.

TERMS OF THE PROPOSED SETTLEMENT

As indicated above, the terms of the proposed Settlement are set forth in the

Stipulation. There are no undisclosed side agreements between Plaintiffs and Defendant.

The essential terms of the Settlement are as follows:

(i)

(ii)

Subject to Court approval, the Settling Parties stipulate, for settlement
purposes only, to class certification of all state law claims that were or that
could have been asserted in the Litigation, and to conditional collective
certification of all federal FLSA claims asserted in the Litigation.

See Exhibit A ¶ 2.1.1.

Also subject to Court approval, the Settling Parties stipulate, for settlement
purposes only, that: (1) Plaintiffs Carlos Alvarez, Ana Blumberg-Markus,
Susan Capozzoli, Andres Cruz, Eugene David, Patrick Grattan, Christopher
Kennedy, Martin Kulman, Felipe Pazos, and Alberto Roque will serve as
Class Representatives; (2) the law firms of Kessler Topaz Meltzer &
Check, LLP, Rose, Klein & Marias, LLP, Thierman Law Firm, Lovell
Stewart Halebian LLP, Berman DeValerio, and Head Seifert & Vander
Weide shall be appointed as Class Counsel; and (3) AB Data, Ltd. will
serve as the Claims Administrator.

See Exhibit A ¶¶ 1.4, 1.7, 1.11.

(iii)

The Class includes all Securities Brokers who worked for RBC in the
United States at any time between June 1, 2007 and July 1, 2010 (“Class
Period”) and includes the Collective Opt-In Class and the FLSA Settlement
Class:

(a)

The Collective Opt-In Class includes all Class Members who have
filed consent forms to participate in the Litigation as of October 19,
2010 and who have not otherwise withdrawn their consent forms or
submitted an Election to Opt-Out of Settlement and Class Action
Form.

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(b)

The FLSA Settlement Class includes all Class Members who have
not previously filed a consent form with the Court to participate in
this Litigation and who are not members of the Collective Opt-In
Class.

See Exhibit A ¶¶ 1.14, 1.24, 1.42.

(iv) RBC agrees to pay Settlement Consideration in the gross amount of
$5,050,000.000, which is non-reversionary6, to settle the wage and hour
claims in this case, while continuing to deny liability.

See Exhibit A ¶¶ 1.41, 2.2.1.

(v) Within twenty-one (21) days after the Court enters its Preliminary Approval
Order, the Claims Administrator will mail to each Member of the
Collective Opt-In Class: (1) a Collective Opt-In Class Notice; (2) an
Election to Opt Out of Settlement and Class Action Form; and (3) a Change
of Name and/or Address Information Form. The Claims Administrator will
mail to each Member of the FLSA Settlement Class: (1) an FLSA
Settlement Class Notice; (2) a Claim and Consent to Join Settlement Form;
(3) an Election to Opt Out of Settlement and Class Action Form; and (4) a
Change of Name and/or Address Information Form. The deadline to
respond to the Class Notice shall be ninety (90) days after the Claims
Administrator mails Class Notice to Class Members.

See Exhibit A ¶¶ 1.31, 1.32, 2.7.7.

(vi)

If a fully completed and properly executed Opt Out form is not received by
the Claims Administrator from a Class Member and postmarked on or
before the Notice Response Deadline, then that Class Member will be
deemed to have forever waived his or her right to opt out of the Settlement
Class and will be deemed to be a Member of the Settlement Class. As a
Member of the Settlement Class, that Class Member will become bound by
the Released State Law Claims (defined in Section 1.38 of the Stipulation)
portion of the Judgment if the Effective Date occurs.


Any portion of the Net Settlement Amount that is not distributed to Class
6
Members because those Class Members submitted Opt-Outs or did not file timely and
complete Claim and Consent to Join Settlement Forms shall not revert to RBC, but
instead shall be reapportioned for distribution among the Participating Claimants. See
Exhibit A ¶ 2.2.4.

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Class Members who do timely submit fully completed and properly
executed Opt Out forms shall have no further role in the Litigation, and for
all purposes shall be regarded as if they never were either a party to this
Litigation or a Class Member, and thus they shall not be entitled to any
benefit as a result of the Litigation, the Stipulation and the Settlement, nor
will they have released any claims they may have against RBC.

See Exhibit A ¶¶ 1.42, 2.8.2.

(vii) Class Members who do not opt out of the Settlement Class may object to
the Stipulation by submitting written objections to the Court and mailing
copies
the Claims
to Class Counsel, counsel for Defendant, and
Administrator, postmarked by the Notice Response Deadline.

See Exhibit A ¶ 2.8.3.

(viii) Class Members who do not opt out of the Settlement Class may also elect
to become Participating Claimants and become bound by the Released
Federal Law Claims (defined in Section 1.39 of the Stipulation) portion of
the Judgment if the Effective Date occurs. Members of the Collective Opt-
In Class who do not properly opt out of the Settlement will automatically
become Participating Claimants. Members of the FLSA Settlement Class
who wish to exercise this option must fully and timely complete, execute
and mail the Claim and Consent to Join Settlement Form to the Claims
Administrator postmarked on or before the Notice Response Deadline. If a
completed and properly executed Claim and Consent to Join Settlement
Form is not received by the Claims Administrator from an FLSA
Settlement Class Member, then that Class Member will be deemed to have
forever waived his or her right to be a Participating Claimant and receive
payment under the Settlement. However, as long as they do not properly
submit Opt Outs, Class Members shall be deemed Members of the
Settlement Class and shall be subject to the Judgment even if they do not
submit a Claim and Consent to Join Settlement Form. Those, however,
who did not opt-in to the Litigation (and, thus, are not Members of the
Collective Opt-In Class) and did not submit an Opt Out form will not be
deemed to have waived any FLSA claims they may have against
Defendant.

See Exhibit A ¶¶ 1.34, 2.8.4.

(ix)

The Settlement Consideration will be used to pay the timely and valid
claims of Participating Claimants, including Collective Opt-In Class
Participation Payments, the attorneys’ fees and litigation costs of Class

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Counsel, as approved by the Court, the individual Class Representative
Enhancements, as approved by the Court, the agreed upon fees and costs of
the Claims Administrator, as approved by the Court, and any other
Administrative Costs in connection with the implementation of the
Stipulation. The Settlement Consideration less Class Counsel’s attorneys’
fees and litigation costs, the Class Representative Enhancements, and
Administrative Costs is referred to as the “Net Settlement Amount” and is
available for distribution to Participating Claimants.

See Exhibit A ¶¶ 1.30, 2.2.1, 2.2.2.

(x)

The Settlement Consideration will not be used to pay RBC’s share of
payroll, state and federal taxes.

See Exhibit A ¶¶ 1.41.

(xi) Any portion of Class Counsel’s fees and costs or the Class Representative
Enhancements that is not approved or awarded by the Court shall be
included in the Net Settlement Amount and shall be distributed to
Participating Claimants.

See Exhibit A ¶ 2.2.3.

(xii) Each Participating Claimant will receive a payment determined pursuant to

the Allocation Formula developed by Class Counsel:

(a)

For each Member of the FLSA Settlement Class, the Allocation
Formula will take into account the calendar months that the FLSA
Settlement Class Member was actively employed as a Securities
Broker for more than fifteen (15) calendar days within the Class
Period (“Compensable Work Month”). The Allocation Formula
factors in the months in which an FLSA Settlement Class Member’s
monthly pro-rated compensation was in excess of One Hundred
Thousand Dollars
Each
Compensable Work Month shall be given a multiplier of 1.
However, a multiplier of 3 shall be given for those Work Months in
which an FLSA Settlement Class Member’s annualized income is
less than $100,000. Members of the FLSA Settlement Class may
elect to participate in the Settlement by timely completing and
submitting a Claim and Consent to Join Settlement Form, and will
thereafter be referred to as a “Participating Claimant.” Each
Participating Claimant shall receive a pro-rata distribution of the Net
Settlement Amount based upon
their Adjusted

for a calendar year.

($100,000)

the sum of

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(b)

Compensable Work Months divided by the sum of all Adjusted
Compensable Work Months of the Participating Claimants.

For each Member of the Collective Opt-In Settlement Class, the
Allocation Formula will take into account the calendar months that
the Collective Opt-In Class Member was actively employed as a
Securities Broker for more than fifteen (15) calendar days within the
Class Period (“Compensable Work Month”). The Allocation
Formula factors in the months in which a Collective Opt-In Class
Member’s monthly pro-rated compensation was in excess of One
Hundred Thousand Dollars ($100,000) for a calendar year. Each
Compensable Work Month shall be given a multiplier of 1.
However, a multiplier of 3 shall be given for those Work Months in
which a Collective Opt-In Class Member’s annualized income is less
than $100,000. Unless a Collective Opt-In Class Member submits
an Election to Opt Out of Settlement and Class Action Form, that
Collective Opt-In Class Member shall receive a pro-rata distribution
of the Net Settlement Amount based upon the sum of their Adjusted
Compensable Work Months divided by the sum of all Adjusted
Compensable Work Months of the Participating Claimants.

In addition to their pro-rata distribution of the Net Settlement
Amount, Members of the Collective Opt-In Class shall receive a
Collective Opt-In Class Participation Payment in the amount of
$1,000 in recognition of their efforts to join the Litigation prior to
the Settling Parties reaching the Settlement.

To receive a payment under this Settlement, Members of the
Collective Opt-In Class need not do anything because they have
already affirmatively joined this case by submitting their signed
consent forms. By doing nothing, Members of the Collective Opt-In
Class, including the Class Representatives, will be considered
Participating Claimants for purposes of allocation of the Net
Settlement Amount and will receive their pro-rata distribution like
Members of the FLSA Settlement Class who submit timely and valid
Claim and Consent to Join Settlement Forms.

See Exhibit A ¶ 2.3.1-2.3.4, 2.8.2, 2.8.4.

(xiii) The Class Period for purposes of calculating the Compensable Work
Months for the Class Representatives shall mean the period beginning three
years prior to the date when the Class Representative filed his or her
complaint through the date of termination of his or her employment with

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RBC.

See Exhibit A ¶ 2.14.2.

(xiv) Class Counsel will move the Court for an award of attorneys’ fees of up to
33 1/3% of the Settlement Amount, along with litigation costs and
expenses. In addition, Class Counsel will request that the Court award
Class Representative Enhancements for the Class Representatives in an
amount not to exceed $20,000 per Class Representative to compensate
them for the time that they spent, the contributions that they made, and the
risks that they undertook, in prosecuting the Litigation on behalf of the
Settlement Class. Each Class Representative shall be required to sign the
appropriate State-specific release in exchange for receiving a Class
Representative Enhancement.

See Exhibit A ¶¶ 2.11.1, 2.11.4.

(xv) Finally, the Settlement provides for a final Settlement Hearing regarding
the fairness, adequacy, and reasonableness of the Settlement and Class
Counsel’s request for attorneys’ fees, litigation costs and expenses, and
Class Representative Enhancements. The Class Notice will advise Class
Members of the Settlement Hearing and their right to object. At the
Settlement Hearing, the Settling Parties will address any timely written
objections from Class Members or any concerns raised by Class Members
who attend the Settlement Hearing, as well as any timely stated concerns of
any state officials who receives a notice under the Class Action Fairness
Act (“CAFA”), if any, and any concerns of the Court, if any, and the Court
will have a second opportunity to review the Settlement before deciding
whether to grant final approval.

See Exhibit A ¶¶ 1.43, 2.6.4, 2.8.3.

IV.

THE COURT SHOULD GRANT PRELIMINARY APPROVAL TO THE
SETTLEMENT

A.

The Proposed Settlement is Entitled to an Initial Presumption of
Fairness

Plaintiffs present this Settlement to the Court for its review under FED. R. CIV. P.

23, which provides in pertinent part:

(e)

Settlement, Voluntary Dismissal, or Compromise

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(1)

(A) The court must approve any settlement, voluntary
dismissal, or compromise of the claims, issues, or
defenses of a certified class.

(B) The court must direct notice in a reasonable manner to
all class members who would be bound by a proposed
settlement, voluntary dismissal, or compromise.

(C) The court may approve a settlement, voluntary
dismissal, or compromise that would bind class
members only after a hearing and on finding that the
settlement, voluntary dismissal, or compromise is fair,
reasonable, and adequate.

Federal courts strongly favor the voluntary resolution of complex class actions.

See White v. NFL, 836 F. Supp. 1458, 1476 (D. Minn. 1993) (citing Armstrong v. Bd. of

Sch. Dirs., 616 F.2d 305, 312-13 (7th Cir. 1980)); see also Newberg & Conte, Newberg

on Class Actions §11.41 (3d ed. 1992). In class actions in particular, “there is an

overriding public interest in favor of settlement.” In re Charter Commc’ns, Inc. Secs.

Litig., No. 02-CV-1186, 2005 WL 4045741, at *4 (E.D. Mo. June 30, 2005) (citing

Cotton v. Hinton, 559 F.2d 1326, 1331 (5th Cir. 1977)); see also Little Rock Sch. Dist. v.

Pulaski Cnty. Special Sch. Dist. No. 1, 921 F.2d 1371, 1391 (8th Cir. 1990) (holding that

the policy favoring settlement is so strong that such settlement agreements are

“presumptively valid”). Furthermore, “there is a presumption of fairness when a

settlement is negotiated at arm’s length by well informed counsel.” In re Charter

Commc’ns Inc. Secs. Litig., 2005 WL 4045741, at *5 (citing Weinberger v. Kendrick, 698

F.2d 61, 74 (2d Cir. 1982)). The district court has discretion in evaluating a class action

settlement, and its decision will not be overturned unless an abuse of discretion is shown.

See White, 836 F. Supp. at 1476-77 (citing Wiener v. Roth, 791 F.2d 661, 662 (8th Cir.

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CASE 0:06-cv-03093-JRT-FLN Document 346 Filed 08/16/11 Page 27 of 53

1986)).

The Court has wide discretion in determining whether to approve a class action

settlement; however, the United States Supreme Court has cautioned that in reviewing a

proposed class action settlement, a court should “not decide the merits of the case or

resolve unsettled legal questions.” Carson v. Am. Brands, Inc., 450 U.S. 79, 88 n. 14

(1981); see also City of Detroit v. Grinnell Corp., 495 F.2d 448, 462 (2d Cir. 1974),

accord In re Visa Check/Mastermoney Antitrust Litig., 297 F. Supp. 2d 503, 509 (E.D.

N.Y. 2003). Because the object of the settlement is to avoid, not confront, the

determination of contested issues, the approval process should not be converted into an

abbreviated trial on the merits. See Van Horn v. Trickey, 840 F.2d 604, 607 (8th Cir.

1988) (“the court need not undertake the type of detailed investigation that trying the case

would involve.”). Instead, the Court’s inquiry should be limited to the consideration of

“whether the proposed settlement is fair, adequate, and reasonable.” Buchet v. ITT

Consumer Fin. Corp., 845 F. Supp. 684, 691 (D. Minn. 1994) (citing Van Horn, 840 F.2d

at 606). When experienced counsel have presented a settlement that has been negotiated

at arm’s-length in an adversarial setting, there is an initial presumption that the settlement

is fair and reasonable. See In re Minolta Camera Prods. Antitrust Litig., 668 F. Supp

456, 460 (D. Md. 1987); Chatelain v. Prudential-Bache Secs., Inc., 805 F. Supp. 209, 212

(S.D.N.Y. 1992) (a strong initial presumption of fairness attaches to the proposed

settlement if the settlement is reached by experienced counsel after arm’s-length

negotiations, and great weight is accorded to the recommendations of counsel, who are

most closely acquainted with the facts of the underlying litigation).

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The initial presumption of fairness and adequacy applies with special force here

because the Settlement was reached by experienced, fully-informed counsel after

protracted and intense arm’s-length negotiations. See In re UnitedHealth Group Inc.

Shareholder Derivative Litig., 631 F. Supp. 2d 1151, 1158 (D. Minn. 2009) (“The

proposed settlement was forged in arm’s length negotiations and aided by an

experienced, independent mediator. Discovery has been extensive; the parties are fully

informed of the merits of their claims. ‘Where sufficient discovery has been provided

and the parties have bargained at arms-length, there is a presumption in favor of the

settlement.’”) (citing City P’ship Co. v. Atl. Acquisition Ltd. P’ship, 100 F.3d 1041, 1043

(1st Cir. 1996)). “So long as the integrity of the arm’s length negotiation process is

preserved … a strong initial presumption of fairness attaches to the proposed settlement.”

In re PaineWebber Ltd. P’ships Litig., 171 F.R.D. 104, 125 (S.D.N.Y. 1997). See also

Manual for Complex Litigation § 30.43 at 289 (3d ed. 2002); Newberg & Conte,

Newberg on Class Actions § 11.42 (3d