Kraus v. Pa Fit II, LLC
155 F. Supp. 3d 516
| E.D. Pa. | 2016Background
- Kraus, a personal trainer, sued her employers for retaliation, hostile work environment, and unpaid wages under Title VII, the PaHRA, the FLSA, and state wage laws after being fired following complaints about coworkers’ sexual conduct.
- Parties mediated before defendants answered and executed a global settlement for $18,000: $10,934.27 to Kraus (W-2) for wages and $7,065.73 to counsel (1099) for fees/costs; dismissal with prejudice and NLRB withdrawal were terms.
- Defendants had contested liability in administrative proceedings (NLRB/PaHRC); ALJ found Kraus’s NLRB accusations made with reckless disregard for the truth, but exceptions remained pending.
- Court required judicial approval because part of the settlement involved FLSA claims; parties moved for approval under the Lynn’s Food fairness-and-reasonableness standard.
- The Court found a bona fide dispute over FLSA wages existed and that the overall settlement amount was reasonable, but rejected overly broad release language and declined to approve attorneys’ fees without a supporting justification (lodestar or other basis).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether private FLSA settlements require court (or DOL) approval | Kraus: §253(a) permits private compromise of bona fide FLSA disputes without court scrutiny | Defendants: (implicit) settlement should be enforceable as agreed and avoids litigation | Court: Private FLSA settlements require judicial (or DOL) supervision; applied Lynn’s Food fairness-and-reasonableness review |
| Whether 29 U.S.C. §253(a) governs private FLSA settlements here | Kraus: §253(a) allows compromise of bona fide disputes resolving disputed wages | Defendants: (implicit) settlement is permissible under parties’ agreement | Held: §253(a) applies only to pre-May 14, 1947 claims and does not apply here; parties cannot avoid court scrutiny via §253(a) |
| Whether a global release in the agreement validly waives FLSA rights | Kraus: global waiver permissible as part of a comprehensive settlement | Defendants: (implicit) broad release acceptable to achieve finality | Held: Release is overbroad and unclear as to FLSA claims; court declined to approve the release as drafted |
| Whether the requested attorneys’ fees ($7,065.73; ~39% of fund) are reasonable | Kraus: fee portion agreed in settlement; represents counsel’s work and risk | Defendants: (implicit) no specific opposition in record | Held: Court denied fee approval without prejudice because counsel provided no lodestar, time records, or other basis to support the percentage award |
Key Cases Cited
- Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir. 1982) (establishes district-court fairness-and-reasonableness review for FLSA settlements)
- Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015) (FLSA settlement dismissals require court or DOL approval)
- Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697 (1945) (statutory rights affecting public interest cannot be waived to defeat statutory policy)
- D.A. Schulte, Inc. v. Gangi, 328 U.S. 108 (1946) (compromises that reduce statutory wage protections undermine FLSA purpose)
- Martin v. Spring Break '83 Prods., LLC, 688 F.3d 247 (5th Cir. 2012) (examined retrospective enforceability of private FLSA settlement where employees were represented)
- Walton v. United Consumers Club, Inc., 786 F.2d 303 (7th Cir. 1986) (courts have refused to enforce wholly private FLSA settlements without supervision)
- Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728 (1981) (FLSA provides individual protections that cannot be waived by contract)
- Copeland v. ABB, Inc., 521 F.3d 1010 (8th Cir. 2008) (only DOL supervision or district-court judgment permit valid compromise of FLSA claims)