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CVS Must Pay Up In Fight Over $34M OT Settlement

Law 360—Ben James, additional reporting by Bill Donahue. Editing by Kat Laskowski.

A Rhode Island federal judge ruled against CVS Caremark Corp. on Monday in a fight over an allegedly underfunded $34 million overtime class action settlement, holding that a clerical error didn't relieve CVS of its obligation to cough up an additional $2 million. 

U.S. District Judge Mark McConnell Jr. said that the additional payment still left CVS well below the $34 million upper limit on the amount the company agreed to pay when it struck a deal to resolve 11 consolidated wage-and-hour class actions.

The plaintiffs said CVS was taking advantage of a clerical error by settlement administrator Garden City Group Inc. and withholding nearly $2 million that was supposed to go to the class. The error followed the court's decision to trim the amount of attorneys' fees awarded under the deal from $11.3 million to $8.5 million.

But CVS argued that the settlement class was seeking modification — rather than enforcement — of the agreement, which it said should be enforced as written.

Judge McConnell sided with the plaintiffs Monday.

“This court is not modifying the settlement agreement, as alleged by CVS, but rather is simply enforcing it by ordering that it make the correct full payment to which it agreed. A clerical error by the settlement administrator does not relieve CVS of that obligation,” Monday's order said.

The litigation kicked off in February 2009, when William Nash, who worked for CVS in Florida, filed a Fair Labor Standards Act complaint claiming the company had failed to pay assistant store managers overtime. The Nash case and 10 others were consolidated for settlement purposes.   

At a final approval hearing in April, the court inquired as to who would benefit from a potential reduction in attorneys' fees and was told that any savings would go to the class, and not CVS, the plaintiffs said. On April 9, the court gave the deal its blessing but awarded the plaintiffs' lawyers a quarter, rather than a third, of the settlement amount. 

To determine CVS' "residual deposit," Garden City used estimated calculations that preceded the decision to reduce the attorneys' fees, according to the plaintiffs. As a result, CVS' deposit ended up being insufficient under the settlement agreement, they said.

After the “inadvertant miscalculation,” CVS refused to hand over $1,991,228.02 that it owed, the plaintiffs said. 

The deal, which covered state as well as federal claims, called for CVS to pay up to $34 million, with unclaimed settlement funds going back to the company.

“We're glad the judge held CVS to its obligation,” Outten & Golden LLP's Justin Swartz, who represented the plaintiffs, told Law360 on Monday.   

An attorney for CVS was not immediately avilable for comment.

The plaintiffs are represented by the Law Offices of Peter N. Wasylyk, Seth Lesser and Fran Rudich of Klafter Olsen & Lesser LLP, Justin Swartz of Outten & Golden LLP, Gregg Shavitz of The Shavitz Law Group PA, and Kathleen Chavez of Chavez Law Firm PC, among others.

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The case is Nash v. CVS Caremark Corp. et al., case number 1:09-cv-00079, in the U.S. District Court for the District of Rhode Island.