Cheeks v. Freeport Pancake House, Inc.
796 F.3d 199
| 2d Cir. | 2015Background
- Cheeks sued his employers under the FLSA and New York Labor Law for unpaid overtime, liquidated damages, retaliation, and fees; parties later agreed a private settlement.
- The parties filed a joint stipulation of dismissal with prejudice under Fed. R. Civ. P. 41(a)(1)(A)(ii).
- The district court refused to accept the stipulated dismissal unless the settlement was filed and shown to be a fair compromise or approved by the court or the Department of Labor (DOL).
- The parties sought interlocutory appeal under 28 U.S.C. § 1292(b) on whether FLSA claims are exempt from Rule 41(a)(1)(A)(ii).
- The Second Circuit solicited the DOL’s views (which supported court/DOL oversight) and heard supplemental briefing.
- The Second Circuit held that FLSA claims fall within Rule 41’s “applicable federal statute” exception, so stipulated dismissals with prejudice settling FLSA claims require court approval or DOL supervision to be effective.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FLSA is an “applicable federal statute” under Rule 41(a)(1)(A) such that private stipulations dismissing FLSA claims with prejudice require court approval or DOL supervision | Cheeks argued parties may dismiss by stipulation under Rule 41(a)(1)(A)(ii) without court/DOL approval | Freeport Pancake House (and prevailing district practice) argued FLSA’s protective purpose requires court or DOL oversight of settlements | Held: FLSA is an "applicable federal statute"; stipulated dismissals with prejudice resolving FLSA claims require court approval or DOL supervision |
| Whether private settlements of FLSA claims can waive statutory rights without oversight | Cheeks contended parties can privately settle bona fide disputes under Rule 41 | Defendants pointed to precedents allowing private compromise where bona fide disputes exist (and some circuits’ enforcement of such settlements) | Held: Even where bona fide disputes may exist, supervisory review (court or DOL) is required before stipulated dismissal with prejudice is effective |
| Whether the court must accept parties’ refusal to disclose settlement terms when court review is sought | Cheeks sought to keep settlement terms private and proceed by stipulation | District court required disclosure and explanation to assess fairness | Held: Court may require disclosure/evidence supporting fairness because judicial review is required for stipulated dismissal to take effect |
| Whether this decision decides if dismissal without prejudice is permissible without approval | Not directly argued on appeal | Not directly argued | Held: Court expressly declined to decide whether dismissals without prejudice can be done without approval (left for another day) |
Key Cases Cited
- Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697 (1945) (employees cannot privately waive FLSA liquidated damages in absence of bona fide dispute)
- D.A. Schulte, Inc. v. Gangi, 328 U.S. 108 (1946) (private compromise invalid where dispute concerns FLSA coverage)
- Lynn's Food Stores, Inc. v. United States Dep't of Labor, 679 F.2d 1350 (11th Cir. 1982) (FLSA settlements require DOL or court approval to ensure fairness)
- Martin v. Spring Break 83 Prods., L.L.C., 688 F.3d 247 (5th Cir. 2012) (upheld private resolution where bona fide dispute and representation existed; did not wholly reject supervisory review)
- A.H. Phillips, Inc. v. Walling, 324 U.S. 490 (1945) (describing FLSA’s remedial, protective purpose)
- Chao v. Gotham Registry, Inc., 514 F.3d 280 (2d Cir. 2008) (FLSA construed liberally for remedial goals)
- Hester Indus., Inc. v. Tyson Foods, Inc., 160 F.3d 911 (2d Cir. 1998) (dismissal effected by stipulation does not permit court to condition effectiveness absent authority)