Martinez v. SJG Foods LLC
1:16-cv-07890
S.D.N.Y.May 16, 2017Background
- Plaintiffs (former restaurant employees) sued defendants (Benares/associated entities and owners) under the FLSA and NYLL for wage-and-hour violations.
- Parties submitted a proposed settlement agreement and asked the Court to approve it.
- The Court must approve FLSA settlements and determine whether they are fair and reasonable.
- The proposed agreement contained (1) a broad mutual general release covering virtually any claim related to plaintiffs’ employment, (2) a broad confidentiality/non-disclosure clause, and (3) a request for $66,000 in attorneys’ fees without contemporaneous billing records.
- The Court identified overbreadth and public-policy problems with the release and confidentiality provisions and insufficient documentation for the fee request, and therefore declined to approve the settlement as submitted.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of Release | The mutual general release is acceptable as part of a negotiated settlement and benefits both sides. | The release is valid as a mutual compromise and should be approved. | Rejected: release is overbroad (waives virtually any claim related to employment through an undefined effective date) and not narrowly limited to claims in this action. |
| Confidentiality Clause | Confidentiality is a standard settlement term to protect terms and negotiations. | Confidentiality protects parties’ privacy and commercial interests. | Rejected: broad nondisclosure in FLSA settlements contravenes public policy because it undermines FLSA’s goal of informing workers of rights; provision impermissibly bars disclosure of existence and terms. |
| Attorneys’ Fees Documentation | Counsel requests $66,000 as fair and reasonable compensation. | Defendants support the negotiated fee as part of the settlement. | Rejected (as submitted): plaintiffs failed to provide contemporaneous billing records; court cannot assess reasonableness without detailed time/effort documentation. |
| Approval Options / Procedural Disposition | Seek court approval of revised agreement or abandon settlement or dismiss without prejudice. | Same (parties may choose among options). | Court declined approval and gave parties three options by a deadline: (1) submit revised agreement removing overbroad release and confidentiality and provide billing records; (2) abandon settlement and continue litigation; or (3) stipulate to dismissal without prejudice. |
Key Cases Cited
- Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015) (court approval required for FLSA settlements to ensure fairness)
- Wolinsky v. Scholastic Inc., 900 F. Supp. 2d 332 (S.D.N.Y. 2012) (factors to consider in assessing fairness and reasonableness of settlement)