Gallardo v. PS Chicken Inc.
285 F. Supp. 3d 549
E.D.N.Y2018Background
- Plaintiff filed a combined FLSA and New York Labor Law (NYLL) wage-and-hour action; parties informed the court they reached a settlement in principle and later said an agreement was circulating.
- The magistrate judge ordered submission of the settlement for court review and approval, but the parties instead filed a stipulation of dismissal without prejudice and a status report saying they had separately settled NYLL claims.
- Defense counsel argued that (1) dismissal without prejudice obviated court approval and (2) settlement of NYLL claims in a combined action need not be subject to Cheeks review.
- Cheeks v. Freeport Pancake House requires judicial review of certain FLSA settlements but left open whether dismissals without prejudice require court approval.
- The court found the parties’ conduct suggestive of an effort to evade Cheeks review by labeling a global settlement as a dismissal without prejudice and ordered the parties to submit all executed settlement agreements for court review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a dismissal without prejudice in an FLSA case can avoid Cheeks review | Parties may file a Rule 41(a)(1)(A) stipulation without prejudice and avoid court approval | Dismissal without prejudice means no judicial review required | Court: Dismissals labeled "without prejudice" cannot be used to evade Cheeks; where there is a quid pro quo or evidence settlement affects FLSA claims, court review is required |
| Whether separate settlement of NYLL claims in a combined action must be submitted for Cheeks review | NYLL settlement is distinct and need not be reviewed if it addresses only state claims | Separate NYLL agreement can be used to circumvent FLSA review if it affects FLSA rights | Court: Separate NYLL settlements generally need not undergo Cheeks review, but the court may require submission to ensure NYLL agreement does not contain terms that affect or release FLSA claims |
| Whether courts should review dismissals without prejudice to guard against hidden releases or de facto prejudice | Plaintiff implied dismissal without prejudice is final resolution and no review is needed | Parties contend absence of an executed FLSA settlement means no review required | Court: Policy concerns (coercion, hidden releases, statute-of-limitations bar) justify review of agreements that functionally resolve FLSA claims even if dismissal is denominated "without prejudice" |
| What relief is appropriate when parties appear to evade Cheeks | No relief if parties comply with dismissal labeling | Parties ask court to abstain from further involvement | Court: Ordered parties to submit all executed settlement agreements (FLSA and NYLL) for fairness review by a set deadline |
Key Cases Cited
- Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015) (requires judicial oversight of certain FLSA settlements and explains policy concerns that motivate review)