Gurung v. White Way Threading LLC
226 F. Supp. 3d 226
S.D.N.Y.2016Background
- FLSA/NYLL settlement proposed: Gurung would receive $9,000; Hassan would receive $12,460 (fees $12,000, costs $460); total $21,000 net of costs.
- Court preliminarily OK with the settlement amount but not in current form due to two defects.
- First defect: unacceptably broad general release releasing all claims from ‘beginning of the world’ to execution date.
- Second defect: disproportionate attorney’s fee allocation—$12,000 (over 57% of net $21,000) exceeds the customary 1/3 cap in this district.
- Court notes lack of evidence of concrete benefit to Gurung from the broad release and that the fee arrangement was not justified by unusual circumstances.
- Court provides three options for the parties: revise the release and fee, abandon settlement and litigate, or dismiss without prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the general release overbroad and not fair? | Gurung seeks a mutual release; broad waivers protect both sides. | White Way seeks mutual release; standard practice. | Release too broad; not fair and reasonable; not approved in current form. |
| Is the attorney’s fee allocation reasonable? | Hassan’s fee reflects client’s outcome; contingent on hours billed. | Fees align with retainer; 57% of net settlement is acceptable. | Fees exceeding 33% of the net settlement are not approved; not reasonable. |
| Can a mutual and broad release be salvaged with explanations? | Mutuality should cure any improper impact. | No adequate justification shown for broad mutual release. | Court requires narrower release or persuasive explanation of benefits to Gurung before approval. |
Key Cases Cited
- Lopez v. Nights of Cabiria, LLC, 96 F.Supp.3d 170 (S.D.N.Y. 2015) (example of overbroad release not fair and reasonable in FLSA settlements)
- Venegas v. Mitchell, 495 U.S. 82 (Supreme Court 1990) (limits of attorney’s fees under statutory fee shifting versus client retainer)