Case 6:15-cv-06462-JWF Document 53-1 Filed 06/08/17 Page 1 of 10

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF NEW YORK
_________________________________________________

ADAM CUNNINGHAM, ALEX CHEFALO AND

REMO PAGLIA, et al.,

Plaintiffs,
Civil Action No. 15-cv-6462-JWF
v.

SUDS PIZZA, INC., MARKS PIZZERIA, INC. and

MARK S. CRANE,

Defendants.
_________________________________________________

DEFENDANTS MEMORANDUM OF LAW IN FURTHER SUPPORT OF THE

PARTIES JOINT MOTION SEEKING AN ORDER GRANTING APPROVAL OF
THE FINAL SETTLEMENT AGREEMENT

Respectfully submitted,

PHILLIPS LYTLE LLP

Attorneys for Defendants
28 East Main Street, Suite 1400
Rochester, NY 14614-1935
Telephone No. (585) 238-2000
kmulvehill@phillipslytle.com

Kevin J. Mulvehill
Linda Prestegaard
Of Counsel
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TABLE OF CONTENTS
Page

TABLE OF CONTENTS .................................................................................................. i

TABLE OF AUTHORITIES............................................................................................ ii

PRELIMINARY STATEMENT ...................................................................................... 1

LEGAL ANALYSIS ........................................................................................................ 3

POINT I The Reversionary Clause Does Not Render The Agreement Unfair
or Unreasonable. In The Absence Of Evidence Of Collusion, Such
Clauses Are Regularly Approved By Courts ................................................. 3

POINT II The Agreement May Not Be Modified......................................................... 5

CONCLUSION ............................................................................................................... 7

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TABLE OF AUTHORITIES

Page(s)

Cases

Acevedo v. Workfit Medical LLC,

187 F. Supp.3d 370 (W.D.N.Y. 2016) ................................................................... 3, 4, 5

Alleyne v. Time Moving & Storage Inc.,

264 F.R.D. 41 (E.D.N.Y. 2010) ................................................................................... 3

Asare v. The Change Group New York, Inc.,

No. 12 Civ. 3371, 2013 WL 614476 (S.D.N.Y. Nov. 18, 2013) ..................................... 3

Davis v. J.P. Morgan Chase & Co.,

827 F. Supp. 2d 172 (W.D.N.Y. 2011) .................................................................. 3, 4, 6

Diaz v. Eastern Locating Service Inc.,

No. 10 Civ. 4082, 2010 WL 5507912 (S.D.N.Y. Nov. 29, 2010) ................................... 4

Evans v. Jeff D.,

475 U.S. 717 (1986) ..................................................................................................... 5

Hart v. RCI Hospitality Holdings, Inc.,

No. 09 Civ. 3053, 2015 WL 5577713 (S.D.N.Y. Sept. 22, 2015) ................................ 3, 5

Henry v. Little Mint, Inc.,

No. 12 Civ. 3996, 2014 WL 2199427 (S.D.N.Y. Mar. 23, 2014) ................................... 3

Lizondro-Garcia, v. KEFI LLC,

No. 12 Civ. 1906, 2014 WL 4996248 (S.D.N.Y. Oct. 7, 2014) ...................................... 3

Mba v. World Airways, Inc.,

369 Fed.Appx. 194 (2d Cir. 2010) ............................................................................. 3, 6

Mills v. Capital One, N.A.,

No. 14 Civ. 1937, 2015 WL 5730008 (S.D.N.Y. Sept. 30, 2015) ................................... 3

Sewell v. Bovis Lend Lease, Inc.,

No. 9 Civ. 6548, 2012 WL 1320124 (S.D.N.Y. Apr. 16, 2012) ...................................... 3

In re Warner Communications Securities Litigation,

798 F.2d 35 (2d Cir. 1986) ........................................................................................... 6

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PRELIMINARY STATEMENT

As a preliminary matter, Defendants and Marks Pizzeria Franchises deny

Plaintiffs claims, including, but not limited to, any and all allegations that Defendant

Marks Pizzeria, Inc. and/or Mark S. Crane are joint employers of any employees of the

Marks Pizzeria Franchises. (See Joint Stipulation of Settlement and Release, Dkt #35-1, 2

(the Agreement)). Defendants and the Marks Pizzeria Franchises further deny that, for

any purpose other than settling this lawsuit, this action is appropriate for class treatment.

(Agreement, Dkt #35-1, 7). 1

That said, in order to avoid the time and expense of continued litigation, the

Defendants agreed to enter into a settlement of this case. (Agreement, Dkt #35-1, 2). In

reaching this settlement, the Parties engaged in substantial negotiations wherein numerous

proposals were exchanged over the course of several months. (See the Declaration of Kevin

J. Mulvehill, dated June 8, 2017 (Mulvehill Decl.), 4-6). Notably, during negotiations

the Parties agreed upon a comprehensive method for processing claims (Claim Process)

which included, among other things, a reversionary clause. (Agreement, Dkt #35-1 16-

20). The reversionary clause provides that:

Upon the expiration of 100 days after the distribution of the

settlement checks, the amounts representing the Net Settlement
Amount that have not been claimed, cashed or were unable to
be delivered despite the Settlement Administrators good faith
efforts, will be distributed to and retained by the Marks
Pizzeria Franchises. In addition, upon the expiration of 30 days
after the distribution of the settlement checks, the proportional
share of the Net Settlement Amount attributed to all Class
Members who opt out of the settlement will be distributed to
and retained by the Marks Pizzeria Franchises.

1
For purposes of the settlement only, the Parties conditionally stipulated and agreed that the requisites
for establishing certification with respect to the settlement class were met. (Agreement, Dkt #35-1, 6).
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(Agreement, Dkt #35-1, 20). 2

As discussed further below, the reversionary clause was not the result of

collusion. Rather, it was the result of good faith negotiations between the Parties. (Mulvehill

Decl., 9). In fact, the inclusion of the reversionary clause resulted in a significantly higher

Settlement Amount. Upon information and belief, Defendants would not have agreed to the

higher Settlement Amount if the Agreement did not include the reversionary clause.

(Mulvehill Decl., 10).

Furthermore, the credible evidence shows:

the reversionary clause was part of an integrated settlement following several months

of negotiations (Mulvehill Decl., 4-6);

the alternative would have been a reduced settlement without such a clause

(Mulvehill Decl., 7-10); and

the Agreement gives each class member who receives notice the opportunity to

decide whether or not to participate. (Agreement, Dkt #35-1, 16).

On March 7, 2017, the Parties filed the present motion with the Court (the

Motion). (See Dkt #46). During a related Court conference on March 17, 2017, the Court

directed the Parties to file a supplemental memorandum of law addressing reversionary

clauses. (See Dkt #50).

For the reasons discussed below, and in the Plaintiffs Memorandum of Law

dated March 7, 2017, (Dkt #46-1): (1) the reversionary clause contained in the Parties

2
Pursuant to the Agreement, Net Settlement Amount is equal to the Settlement Amount (i.e.,
$1,700,000.00), less the Administrative Costs. (Agreement, Dkt #35-1, 13(f)). In turn, Administrative Costs
is defined to mean all attorneys fees and costs, Service Awards, administrative costs, and enhancement
payments. (Agreement, Dkt #35-1, 10 (emphasis added)).

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Agreement does not render the Agreement unfair or unreasonable; and (2) the Motion

should be granted in its entirety.

LEGAL ANALYSIS

I. The Reversionary Clause Does Not Render The Agreement Unfair or

Unreasonable. In The Absence Of Evidence Of Collusion, Such Clauses Are
Regularly Approved By Courts.

As a preliminary matter, it is well settled that absent collusion during the

negotiation process, reversionary clauses do not render a settlement agreement unfair or

unreasonable. See Davis v. J.P. Morgan Chase & Co., 827 F. Supp. 2d 172, 186 (W.D.N.Y.

2011) (As I see no evidence of collusion in the case before me, this provision does not pose

an obstacle to approval of the settlement, including the fee agreement.).

In fact, courts in the Second Circuit have routinely approved settlement

agreements containing reversionary clauses. See, e.g., Mba v. World Airways, Inc., 369

Fed.Appx. 194, at * 2 (2d Cir. 2010) (This Court has held that unclaimed portions of a

class action fund in a private action may properly be returned to the defendant.); Acevedo v.

Workfit Medical LLC, 187 F. Supp.3d 370 (W.D.N.Y. 2016); Hart v. RCI Hospitality Holdings,

Inc., No. 09 Civ. 3053, 2015 WL 5577713 (S.D.N.Y. Sept. 22, 2015); Mills v. Capital One,

N.A., No. 14 Civ. 1937, 2015 WL 5730008 (S.D.N.Y. Sept. 30, 2015); Fujiwara v. Sushi

Yasuda Ltd, 58 Supp.3d 424 (S.D.N.Y. 2014); Lizondro-Garcia, v. KEFI LLC, No. 12 Civ.

1906, 2014 WL 4996248 (S.D.N.Y. Oct. 7, 2014); Henry v. Little Mint, Inc., No. 12 Civ.

3996, 2014 WL 2199427 (S.D.N.Y. Mar. 23, 2014); Asare v. The Change Group New York,

Inc., No. 12 Civ. 3371, 2013 WL 614476 (S.D.N.Y. Nov. 18, 2013); Sewell v. Bovis Lend

Lease, Inc., No. 9 Civ. 6548, 2012 WL 1320124 (S.D.N.Y. Apr. 16, 2012); Davis v. J.P.

Morgan Chase & Co., 827 F. Supp. 2d 172; Alleyne v. Time Moving & Storage Inc., 264 F.R.D.

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41 (E.D.N.Y. 2010); Diaz v. Eastern Locating Service Inc., No. 10 Civ. 4082, 2010 WL

5507912 (S.D.N.Y. Nov. 29, 2010).

For example, in Acevedo v. Workfit Medical LLC, 187 F. Supp.3d 370

(W.D.N.Y. 2016), this Court approved a settlement agreement resolving alleged violations

of the Fair Labor Standards Act (FLSA) and related state law claims. The Acevedo

settlement agreement included within it a reversionary clause that was remarkably similar to

the reversionary clause contained in the present Agreement. Specifically, the Acevedo

settlement agreements reversionary clause stated:

Upon the expiration of 130 days after the distribution of the

settlement checks, the amounts representing the Net Settlement
Amount that have not been claimed, cashed or were unable to
be delivered despite the Claims Administrator's good faith
efforts, will be distributed to and retained by Defendants. In
addition, upon the expiration of 30 days after the distribution of
the settlement checks, the proportional share of the Net
Settlement Amount attributed to all Class Members who opt
out of the settlement will be distributed to and retained by
Defendants. This provisions of this paragraph are non-material
terms of this agreement and shall not affect the enforceability of
the agreement overall or of any other terms.

(See Acevedo v. Workfit Medical LLC , No. 14 Civ. 6221-EAW, Joint Stipulation of Settlement

and Release, Dkt #75-2, 21). Notably, the Court in Acevedo approved the settlement

agreement in its entirety, finding that it was fair, reasonable, and adequate. Acevedo v.

Workfit Medical LLC, 187 F. Supp.3d at 381.

In the present case, there is no evidence of collusion. As such, the

reversionary clause is not an obstacle to approval of the Parties Agreement. Davis v. J.P.

Morgan Chase & Co., 827 F.Supp.2d at 186. Indeed, in Plaintiffs motion for attorneys fees,

opposing counsel argues, albeit, incorrectly, that, in the event the Court awards a lesser fee,

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an alternative fee calculation method should be utilized to avoid unintentionally enriching

Defendants. (See Dkt #52-1, 13-18). Defendants object to Plaintiffs proposal. That said,

opposing counsels groundless position clearly demonstrates that there has been no

collusion between the parties.

Again, the credible evidence shows:

the reversionary clause was part of an integrated settlement following several months

of negotiations (Mulvehill Decl., 4-6);

the alternative would have been a reduced settlement without such a clause

(Mulvehill Decl., 7-10); and

the Agreement gives each class member who receives notice the opportunity to

decide whether or not to participate. (Agreement, Dkt #35-1, 16).

Hart v. RCI Hospitality Holdings, Inc., 2015 WL 5577713 (S.D.N.Y. Sept. 22, 2015). Finally,

the reversionary clause in the present case is virtually identical to the language in the

settlement agreement approved by this Court in Acevedo.

Based on the foregoing, Defendants respectfully submit that the reversionary

clause does not render the Agreement unfair or unreasonable and the Motion should be

granted in its entirety.

II. The Agreement May Not Be Modified.

Notably, it is well settled that, when reviewing the terms of a class settlement

agreement, Courts should only approve or disapprove the agreement as written and should

not engage in rewriting the agreements terms. See Evans v. Jeff D., 475 U.S. 717, 726-27

(1986) ([T]he power to approve or reject a settlement negotiated by the parties before trial

does not authorize the court to require the parties to accept a settlement to which they have

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not agreed.); Mba v. World Airways, Inc., 369 Fed.Appx. 194, at * 2 (2d Cir. 2010) (finding

district courts refusal to grant plaintiffs request to restructure the terms of the settlement

agreement to avoid the [reversionary clause] was not an abuse of discretion, noting the

district judge generally should not dictate the terms of a settlement agreement in a class

action.); In re Warner Communications Securities Litigation, 798 F.2d 35, 37 (2d Cir. 1986)

([I]t is not a district judge's job to dictate the terms of a class settlement; he should approve

or disapprove a proposed agreement as it is placed before him and should not take it upon

himself to modify its terms.). Indeed, this Court has previously stated as much:

In deciding whether a settlement should be approved, the court

must also keep in mind that its role is circumscribed. The Court
may approve or reject the settlement, but it does not have the
authority to delete, modify or substitute certain provisions.

Davis v. J.P. Morgan Chase & Co., 827 F. Supp.2d at 176.

Based on the forgoing, the Court may not rewrite the Agreement to remove

the reversionary clause. Davis v. J.P. Morgan Chase & Co., 827 F. Supp.2d at 176-77.

For the same reasons, Defendants respectfully submit that the Court should not

restructure the Agreement to circumvent the reversionary clause, as doing so would require

the Court to modify the terms of the Parties Agreement. World Airways, Inc., 369 Fed.Appx.

194, at * 2 ([T]o the extent that Plaintiffs requested that the lower court restructure the

terms of the settlement agreement to avoid the reversion, we find that the court's refusal to

do so was not an abuse of discretion.).

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CONCLUSION

Based on the foregoing, and the Plaintiffs Memorandum of Law dated March 7,

2017, (Dkt #46-1), the Parties request that the Motion be granted in its entirety.

Dated: Rochester, New York PHILLIPS LYTLE LLP

June 8, 2017

By: __/s/Kevin J. Mulvehill____________

Kevin J. Mulvehill
Linda Prestegaard
Attorneys for Defendants
Phillips Lytle LLP
28 East Main Street
Suite 1400
Rochester, NY 14614-1935
Telephone No. (585) 238-2000
kmulvehill@phillipslytle.com
lprestegaard@phillipslytle.com

Doc #02-536736.3

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