(CN) – The Sixth Circuit on Monday rejected a request by four strippers to overturn a $6.5 million class-action settlement between their employers and more than 28,000 of their fellow exotic dancers for wage violations.
The dancers had sued Déjà Vu Services Inc. in 2016 for violations of the Fair Labor Standards Act and state employment laws, claiming they had been misclassified as independent contractors.
The parties reached a settlement agreement in early 2017, requiring each of the company’s clubs to provide dancers with entertainer assessment forms to determine whether they are employees or independent entertainers.
Under the deal, employees would receive 20% commissions on their dance fees and beverages that customers buy for them. They must be paid minimum wage and would also receive two costumes with logos per month.
On the other hand, independent entertainers would not have to wear certain costumes, and Déjà Vu could not impose any work schedule on them. Unlike employees, they would not be required to share their tips with co-workers.
The settlement also called for a $6.55 million payment, of which $900,000 would go attorneys.
A federal court approved the agreement in June 2017, but dancers Eva Cabrera, Brittney Halverson and two others identified only as B.D. and C.T. objected.
Their objection was rejected, and they argued on appeal that the settlement did not meet procedural requirements and the district court didn’t apply the proper factors to test the fairness of the deal.
In a ruling issued Monday, a Sixth Circuit panel led by Chief U.S. Circuit Judge R. Guy Cole Jr. found the agreement met the most important of the seven required factors: the likelihood of the dancers’ success on the merits.
The four objectors had argued that the dancers at Déjà Vu’s 64 clubs could have collected up to $141 million if the case had gone to trial, but the Cincinnati-based appeals court ruled that the lower court did not abuse its discretion when it approved the settlement.
“Although the court acknowledged that the damages model was imperfect based on the lack of records for many class members, it still found that the model was useful to determine class members’ range of possible recovery,” Cole wrote. “The district court also considered possible counterclaims against the dancers, the potential of an unfavorable verdict finding that the dancers should be classified as independent contractors, and the risk that the dancers would have to face mandatory and binding arbitration in compliance with the arbitration clauses in their performance leases.”
The judge noted that dancers could be compensated through cash or credits toward their daily rent at the clubs. He called the value of the settlement “significant.”
“The injunctive relief mandates extensive changes to Déjà Vu’s business practices, and both the $1 million cash pool and the $4.5 million secondary pool are available to provide financial compensation to the dancers in the form that best suits each individual dancer’s circumstances,” Cole wrote.
According to the opinion, 19% of the class – 4,623 dancers – had opted into the settlement, which exceeded the parties’ expectations of 15%.
“Thus, the district court did not abuse its discretion in finding that the level of support and participation from the class supported approval of the settlement agreement,” the ruling states.
Cole also wrote that the objectors did not prove their procedural claims that the class release was overly broad and the notice did not inform class members of their rights.
U.S. Circuit Judge Helene N. White, who joined the majority’s decision in part, wrote a partially dissenting opinion.
“The settlement agreement imposes severe restrictions on the redemption of the secondary-pool credits,” White wrote. “The credit pool is only available for a year, and the unclaimed funds in the secondary pool revert to defendants at the end of the year.”
She added that the attorney fee total was impermissibly inflated by the value of credits that might not be redeemed.
U.S. Circuit Judge John Nalbandian rounded out the panel.
Attorney Harold Lichten of the Boston firm of Lichten & Liss-Riordan represented the objectors. Bradley Shafer of Lansing represented Déjà Vu, while Jason Thompson of Sommers Schwartz in Southfield, Mich., argued on behalf of the dancers who accepted the settlement.
Déjà Vu’s attorney said in a statement that “the most important thing is that this is not merely a monetary settlement,” referring to changes for employee and contractor classifications.
“The other attorneys and I built in a very elaborate assessment process,” Shafer said. “That’s one part of the settlement agreement that I am most proud of. Moving forward, I hope we will not have excessive litigation on working classifications.”