319 F.R.D. 111
S.D.N.Y.2017Background
- Plaintiff and defendant reached a settlement of FLSA claims via Federal Rule of Civil Procedure 68 (offer of judgment).
- The Second Circuit in Cheeks held that FLSA settlements require either court or Department of Labor (DOL) approval when dismissed under Rule 41.
- Parties argued Rule 68 operates differently and that an accepted offer requires the clerk to enter judgment without judicial review.
- Courts in the Circuit are split: many held Rule 68 judgments need no FLSA-specific approval; a minority required court review.
- The Court reviewed Cheeks, statutory purposes of the FLSA, contract-capacity principles, and exceptions to mandatory Rule 68 operation, and concluded judicial (or DOL) approval is required for FLSA settlements reached by Rule 68.
- The Court certified the question for interlocutory appeal under 28 U.S.C. § 1292(b) but ordered that, absent an appeal, the parties must submit materials supporting fairness of the settlement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FLSA claims can be settled under Rule 68 without court or DOL approval | Rule 68 mandates clerk entry of judgment upon acceptance; no statutory exception like Rule 41 applies, so no approval required | Same as plaintiff: Rule 68’s text is mandatory and permits settlement without judicial oversight | Court: No — Cheeks’ rationale and FLSA policy extend to Rule 68; judicial (or DOL) approval required |
| Whether Rule 68’s mandatory language precludes any judicial review | Rule 68’s plain language ("the clerk must enter judgment") leaves no room for court scrutiny | Rule 68 is self-executing and should not be rewritten by courts | Court: Not absolute — exceptions exist; Rule 68 does not eliminate the court’s duty to review in contexts requiring protection (e.g., FLSA) |
| Whether arm’s-length representation obviates need for review | Parties represented by counsel => bargaining power imbalance mitigated; thus review unnecessary | Representation makes settlement reliable; review would undermine Rule 68’s settlement function | Court: Representation is a factor in fairness review but does not eliminate requirement for review given FLSA’s remedial purpose |
| Whether entering judgment on an accepted Rule 68 offer could violate substantive FLSA rights or the Rules Enabling Act | Parties did not raise specific Rules Enabling Act claim here; Rule 68 preserves settlement incentives | Rule 68 could not be interpreted to expand claimants’ capacity to waive FLSA rights without running afoul of substantive protections | Court: Avoided full Rules Enabling Act ruling but noted potential conflict; held policy and contract-capacity principles counsel in favor of requiring approval |
Key Cases Cited
- Cheeks v. Freeport Pancake House, 796 F.3d 199 (2d Cir. 2015) (FLSA settlements require court or DOL approval when dismissed under Rule 41 to prevent abuse and protect remedial purposes)
- Lynn’s Food Stores, Inc. v. U.S. Dep’t of Labor, 679 F.2d 1350 (11th Cir. 1982) (identifies DOL supervision and judicial scrutiny as the two permissible methods to compromise FLSA claims)
- Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728 (1981) (FLSA rights are nonwaivable and cannot be abridged by contract)
- Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697 (1945) (FLSA enacted to protect workers from unequal bargaining power; rights not subject to private waiver)
- A.H. Phillips, Inc. v. Walling, 324 U.S. 490 (1945) (describes the remedial and humanitarian aims underlying wage-and-hour laws)
- Marek v. Chesny, 473 U.S. 1 (1985) (purpose of Rule 68 is to encourage settlement by putting pressure on plaintiffs to evaluate litigation risks)
- Util. Automation 2000, Inc. v. Choctawhatchee Elec. Co-op., 298 F.3d 1238 (11th Cir. 2002) (Rule 68 does not relieve courts of independent duties to review settlement terms in certain contexts)
- Gordon v. Gouline, 81 F.3d 235 (D.C. Cir. 1996) (Rule 68 offers in contexts like class actions still require court approval or fairness review)