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SDNY signs off on $5.85M deal in intern wage suit against Conde Nast

By Lisa Milam-Perez, J.D.

Media company Conde Nast will pay up to $5.85 million to settle a class and collective action brought by former unpaid interns who contended they should have been compensated as employees for their work at The New Yorker and W magazine, in a deal given preliminary approval by a federal magistrate judge in New York. The court also granted class certification, for settlement purposes; approved a proposed notice to class members; and signed off on plaintiffs’ firm Outten & Golden as class counsel (Ballinger v Advance Magazine Publishers, Inc, dba Condé Nast Publications, December 29, 2014, Pitman, H).

The plaintiffs brought FLSA and NYLL claims against Conde Nast on behalf of all interns who worked for the publisher on an unpaid basis (or received a modest stipend) during the class period. The settlement covers two partially overlapping groups of class members: an FLSA collective action class and a Rule 23 class on New York Labor Law claims.

Settlement terms. The settlement provides participating class members with individual payouts ranging from $700 to $1,900, depending on the type of internship held and whether he or she had received a stipend. The individual recovery amounts to more than 60 percent of the unpaid wages, according to the plaintiffs’ estimate. In addition to the payouts to class members, the settlement covers attorneys’ fees of $650,000 (11 percent of the settlement fund) and $10,000 in costs, as well as $10,000 in service payments to the two named plaintiffs.

While the recovery would likely be greater if the interns were to prevail at trial, that amount “represents substantial value given the attendant risks of litigation,” the plaintiffs persuaded the court, which found the payout was “well above the lowest point of the range of reasonableness.”

Risks of further litigation. Moreover, the court noted the difficulty of maintaining the class through trial (class certification motions in actions brought by interns have ended in inconsistent results, it noted) and that litigating the case would be complex, costly, and long—and likely would be dragged out further by appeal. The court also cited the inherent risk to the plaintiffs given the ongoing uncertainty within the Second Circuit as to the applicable legal test to use in deciding whether an intern is an employee under the FLSA. Two courts in the circuit have adopted two different tests in similar intern cases brought against Hearst Corp and Fox Searchlight, resulting in conflicting outcomes. The unresolved issue is currently pending before the court of appeals.

Class certification. The proposed settlement class satisfied the requirements for Rule 23 certification, the court further held. With an estimated 7,500 class members, the plaintiffs easily met the numerosity requirement. Also, it was uncontested that they all had common duties, such that resolution of their status as employees could be properly addressed on a class basis. That was enough to meet the commonality requirement. And because they alleged they were all employed by the company to do similar work and were all classified as interns (rather than employees) under the same corporate policy, the typicality requirement was satisfied too. In addition, because there was no evidence of any conflict of interest between the named plaintiffs and other class members, and plaintiffs’ counsel was more than experienced in prosecuting employment class actions, the adequacy requirement was met.

Rule 23(b) criteria were satisfied as well: The predominance hurdle was cleared by the plaintiff’s common contention that they were employees entitled to be paid the minimum wage. The central issue in the case is whether the plaintiffs were employees or “trainees,” which the employer did not dispute. As for superiority, the court noted that a class action was more economically sensible due to the plaintiffs’ limited financial resources and the relatively modest size of any individual’s recovery.

“Most of the plaintiffs appear to be younger individuals at the start of their careers,” the court observed. “Such individuals rarely have the resources to finance a federal civil action. A class action is likely the only vehicle by which all plaintiffs can, as a practical matter, adjudicate their state law claims.” Furthermore, class adjudication (as opposed to multiple individual actions) will also conserve judicial resources.

Finally, having certified the Rule 23 class, and because the standard for conditional certification as an FLSA collective is less stringent than the standard for certification of a Rule 23 class, the court held conditional certification of the FLSA collective also was warranted.