Velasquez v. SAFI-G, Inc.
137 F. Supp. 3d 582
S.D.N.Y.2015Background
- Plaintiff Kimberly Velasquez sued SAFI-G, Inc. (d/b/a Caffe Buon Gusto) and its CEO under the FLSA and NYLL; complaint filed April 2015 and defendants did not answer.
- Parties negotiated a settlement shortly after filing and defendants paid $28,000, issued as two checks of $7,666.67 to Velasquez and one check of $7,666.67 to plaintiff's counsel, JPT Law Group.
- The parties filed the settlement for court approval after the district court ordered submission following a voluntary dismissal notice.
- The joint submission estimated Velasquez’s total damages plus pre-judgment interest at $20,870 and identified factual disputes (hours worked, tip-credit applicability, and whether the individual defendant qualified as an employer).
- The court reviewed the settlement for fairness under FLSA standards and closely examined counsel’s fee: counsel took one-third of the settlement ($7,666.67) but much billed work occurred after counsel had already received payment and in response to the court’s approval order.
- The court concluded the fee allocation was unreasonable as applied and conditioned approval on counsel paying Velasquez an additional $2,883.63 (so plaintiff receives $18,216.96 and counsel $4,783.04); the parties were ordered to report compliance by a set date.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FLSA settlements require court approval | Settlement is a fair compromise resolving disputed wage claims | Agreed settlement should be approved | Court reaffirmed judicial approval requirement for FLSA settlements and examined fairness |
| Whether the settlement amount was reasonable given disputed merits | Velasquez argued settlement reflected reasonable compromise given disputed hours, tip-credit, and employer status | Defendants relied on disputes to justify settlement amount | Court found settlement reasonable on merits given disputed issues |
| Whether counsel’s contingency fee (1/3 of settlement) was reasonable | Counsel accepted one-third contingency as negotiated | Defendants did not contest fee amount explicitly | Court found fee excessive relative to lodestar and circumstances and required adjustment |
| Appropriate remedy when fee allocation is unreasonable | Velasquez sought full recovery under FLSA net of unreasonable diversion to counsel | Counsel sought to retain agreed contingency amount | Court conditioned approval on counsel paying plaintiff $2,883.63 more so plaintiff recovery and counsel fee align with court’s lodestar-based determination |
Key Cases Cited
- Cheeks v. Freeport Pancake House, 796 F.3d 199 (2d Cir. 2015) (district court or DOL must approve private FLSA settlements)
- Skidmore v. John J. Casale, Inc., 160 F.2d 527 (2d Cir. 1947) (expressing doubt about validity of contingency-fee reductions from employee recovery under FLSA)
- Wolinsky v. Scholastic Inc., 900 F. Supp. 2d 332 (S.D.N.Y. 2012) (courts must scrutinize attorney-fee awards in FLSA settlements to ensure plaintiffs' recovery is not unreasonably diverted)
- Cisek v. Nat’l Surface Cleaning, Inc., 954 F. Supp. 110 (S.D.N.Y. 1997) (counsel's interest in compensation should not adversely affect relief procured for clients)