Karl v. Zimmer Biomet Holdings, Inc.

Background

James Karl sued Zimmer Biomet Holdings, Inc., in its various corporate forms, alleging that Zimmer misclassified him and other sales associates as independent contractors. The alleged misclassification deprived the associates of various employee benefits. The case involved nearly three years of litigation, three appeals to the court of appeals, and an attempted appeal to the Supreme Court. The court had previously granted Zimmer summary judgment on several claims, including the claim for unpaid overtime under the Fair Labor Standards Act.

The parties reached a class-action settlement in April 2021. The court had previously certified a class under Federal Rule of Civil Procedure 23. After preliminary approval, notice was sent to the class members. The court held a full fairness hearing. No class member opted out or objected to the settlement or to the requested attorney’s fees and costs.

Settlement approval

Under Rule 23(e), a court may approve a class settlement only if it is fair, reasonable, and adequate. The settlement creates a non-reversionary common fund of $7,380,482.10. After attorney’s fees, costs, administrative expenses, and payments related to the Private Attorneys General Act claim, $5,444,480.01 will be distributed among 251 class members based on the biweekly service periods each member worked for Zimmer in California during the class period. The average payment is approximately $21,691.16.

The settlement releases the claims certified for class treatment and other claims arising from the factual or legal allegations in the operative complaint, but excludes claims under the Fair Labor Standards Act. It also provides a process for reclassifying Zimmer sales associates as Internal Revenue Service Form W-2 employees. Highly compensated sales associates may choose to remain independent contractors. The order notes that Zimmer intended to terminate its relationship with two individuals for performance reasons before their transition to employee status, but found that approximately 99 percent of the class would transition to W-2 status.

The court evaluated the eight factors commonly used to assess class settlements, including the strength of the claims, litigation risks and costs, the settlement amount, the stage of the case, counsel’s experience, and the class members’ reaction. The court found that the factors supported approval. It also found that notice was adequate, the release was not unnecessarily vague or broad, the allocation plan was fair, and there was no evidence of collusion or conflicts of interest. The settlement allocates $110,707.22 to resolve the Private Attorneys General Act claim; $83,030.42 goes to the California Labor and Workforce Development Agency, and $27,676.80 goes to participating class members.

The court therefore granted final approval of the proposed class settlement and plan of allocation. It also granted the requests to finally certify the settlement class, find that the notice satisfied Rule 23 and due process, appoint James Karl as settlement class representative, appoint the specified lead and class counsel, and approve CPT Group as settlement administrator. The court retained jurisdiction to enforce the settlement terms for six months from the order’s date.

Attorney’s fees and costs

Class counsel requested $2,066,534.99 in fees, equal to 28 percent of the common fund. Applying the percentage-of-the-fund method and considering the relevant factors, the court awarded $1,814,826.67, equal to 24.6 percent of the total common fund. The award will be distributed among the three law firms in the same proportions as their requested fees. Fifty percent is to be paid after the settlement becomes effective, and the remaining 50 percent is to be paid after defendants certify that the funds have been properly distributed and the file can be closed.

The court also approved $25,645 in reimbursement for counsel’s litigation expenses. The costs included filing, copying, electronic docket, notice, deposition-transcript, and travel expenses. The fees and costs are to be paid from the settlement fund as described in the order.

Disposition

Final approval of the class settlement was granted to the extent stated. The requests concerning class certification, notice, the class representative, class counsel, and the settlement administrator were granted. Attorney’s fees of $1,814,826.67 and class counsel costs of $25,645 were awarded. The order was issued by Judge William Alsup on March 4, 2022.