96 F. Supp. 3d 170 | S.D.N.Y. | 2015
MEMORANDUM OPINION
The three named plaintiffs in this case— Fermín Lopez, Cesar Meló, and Armando Ajtun — were employed as tipped delivery workers
The Proposed Settlement
The proposed settlement agreement (the “Agreement”) would discontinue the case in exchange for a payment of $27,500.
Plaintiffs counsel estimates that if plaintiffs had proceeded to trial, their maximum recovery would have been $49,000, “including liquidated damages, and not including a potential attorneys’ fees award,” and that “[approximately $12,000 of that sum represents unpaid minimum and overtime wages.”
The parties assert that the Agreement is “fair, reasonable, adequate, and in the Parties’ mutual best interests.”
For reasons that will appear, several specific provisions of the Agreement are relevant to the Court’s decision whether to approve it.
First, the Agreement contains a number of confidentiality provisions. One would bar the plaintiffs from discussing the settlement with anyone except their “immediate family members, financial advisors and attorneys.”
To enforce these confidentiality terms, the Agreement contains a liquidated damages provision. Under this section, defendants can seek “specific performance and injunctive or other equitable relief’ for violations of the Agreement’s confidentiality and non-disparagement obligations.
Second, the Agreement contains a series of broad releases. In exchange for the $16,500 settlement payment, the named plaintiffs, under the proposed Agreement, would waive all claims “of any kind whatsoever, at law or in equity, direct or indirect, known or unknown, discovered or undiscovered, which they had, now have or hereafter can, shall or may have against Defendants.”
“any other claim, whether for monies owed, reimbursement, attorneys’ fees, litigation costs, damages, torts, intentional infliction of emotional distress, negligence, promissory estoppel, breach of contract, breach of an implied covenant of good faith and fair dealing, corn structive discharge, wrongful discharge, defamation, fraud, misrepresentation, or otherwise, arising prior to or at the time of the execution of the Agreement.”26
Discussion
I. The Legal Standards Governing Proposed FLSA Settlements
The FLSA places “strict limits on an employee’s ability to waive claims for unpaid wages or overtime under 29 U.S.C. § 216 for fear that employers would coerce employees, into settlement and waiver.”
Some disagreement has arisen among district courts in this circuit as to whether such settlements do in fact require court approval, or may be consummated as a matter of right under Rule 41.
District courts must evaluate whether a proposed FLSA settlement is “fair and reasonable” and whether any proposed award of attorneys’ fees is reasonable.
In determining whether to approve a proposed FLSA settlement, relevant factors include
“(1) the plaintiffs range of possible recovery; (2) the extent to which the settlement will enable the parties to avoid anticipated burdens and expenses in establishing their respective claims and defenses; (3) the seriousness of the litigation risks faced by the parties; (4) whether the settlement agreement is the product of arm’s-length bargaining between experienced counsel; and (5) the possibility of fraud or collusion.”35
Factors that weigh against settlement approval include
“(1) the presence of other employees situated similarly to the claimant; (2) a likelihood that the claimant’s circumstance will recur; (3) a history of FLSA non-compliance by the same employer or others in the same industry or geographic region; and (4) the desirability of a mature record and a pointed determination of the governing factual or legal issue to further the development of the law either in general or in an industry or in a workplace.”36
Examination of whether a proposed FLSA settlement is fair and reasonable, therefore, is an information intensive undertaking. At a minimum, the Court requires evidence as to the nature of plaintiffs’ claims, the bona fides of the litigation and negotiation process, the employers’ potential exposure both to plaintiffs and to any putative class, the bases of estimates of plaintiffs’ maximum possible recovery, the probability of plaintiffs’ success on the merits, and evidence supporting any requested fee award.
II. The Court Will Not Approve the Proposed Settlement in Its Current Form
A. The Parties Have Not Provided the Court with All Necessary Information
The parties have not “provide[d] the Court with each party’s estimate of the number of hours worked or the applicable wage.”
The Agreement fails also to specify the total amount that each of the three named plaintiffs would receive. Section 7 of the Agreement, which delineates the terms of payment, contemplates a two-step process. First, the three named plaintiffs would receive a combined total of $2,000 directly from defendants as wages, subject to taxes and withholding.
Nowhere in the parties’ submission is there an actual, bottom-line statement of the dollar amount that each of the named plaintiffs would receive from the proposed settlement. This omission, coupled with the parties’ failure to specify on a plaintiff-by-plaintiff basis the alleged numbers of hours worked and applicable wages, leaves the Court in a position in which it cannot discharge its duty to determine whether the settlement amount is fair and reasonable as to each of the named plaintiffs.
Any revised settlement agreement should specify the actual dollar amount of each plaintiffs total recovery. The accompanying submission should explain the calculations and factual bases underlying these recovery amounts.
B. The Confidentiality Provisions Are Incompatible with the Purposes of the FLSA
Section 8 of the Agreement contains a battery of highly restrictive confidentiality provisions.
In the first place, the Court previously has held that FLSA settlements may not be confidential and must be posted to the Court’s public docket.
FLSA settlements “indisputably” implicate the “judicial function” because they require judicial approval.
Second, the Court will not approve any provisions in the Agreement that would bar plaintiffs from openly discussing their experiences litigating this wage-and-hour case. These include Section 8(B) (prohibiting the plaintiffs from discussing their experiences except “pursuant to subpoena or other compulsory legal process”), Section 8(C) (stating that plaintiffs “will not make any negative statement about the Defendants, or otherwise disparage them, nor will they encourage or direct others to do so”), and Section 8(E) (limiting plaintiffs’ ability to respond to inquiries about their suit). These provisions, like the confidentiality requirement, run afoul of the purposes of the FLSA and the “public’s independent interest in assuring that employees’ wages are fair.”
The Court’s obligation to police FLSA settlements to ensure that they are fair and reasonable is demanding. It implicates both the rights of the settling employee and the interests of the public at large. As one court has concluded
“To fully implement the policy embodied by the FLSA, the district should scrutinize the compromise in two steps. First, the court should consider whether the compromise is fair and reasonable to the employee (factors ‘internal’ to the compromise). If the compromise is rea*179 sonable to the employee, the court should inquire whether the compromise otherwise impermissibly frustrates implementation of the FLSA (factors ‘external’ to the compromise). The court should approve the compromise only if the compromise is reasonable to the employee and furthers implementation of the FLSA in the workplace.”53
It is in this second sense — that of what the Court has described as “external fairness” — that the confidentiality provisions are problematic.
Among the people who require the protection of the FLSA are workers who are poorly educated and non-English speaking. Some of these workers may have an understandable aversion to courthouses and lawyers.
To be sure, electronic docketing has increased the public’s access to court documents for persons with the knowledge and internet access to look for them.
To this contention one might object, as many have, that confidentiality clauses and non-disclosure agreements encourage settlements by insulating defendants from the possibility of copycat litigation. Indeed, that is so in most contexts. But the congressional purposes underlying the FLSA change the calculus in cases like these. The FLSA evinces “Congress’s intent ... both to advance employees’ awareness of their FLSA rights and to ensure pervasive implementation of the FLSA in the workplace.”
The liquidated damages provision places the conflict between the purposes of the FLSA and the confidentiality obligations of the Agreement in especially stark relief. As one court has explained, “[i]f an employee covered by a confidentiality agreement discusses the FLSA with fellow employees,” the employer’s “most proximate damages” are quite likely “the unpaid FLSA wages due other employees who learned of their FLSA rights from the employee who breached the confidentiality agreement.”
C. The Language of the Proposed Releases Is Impermissibly Overbroad
As drafted, the language of the proposed releases is far too sweeping to be “fair and reasonable.” They purport to waive practically any possible claim against the defendants, including unknown claims and claims that have no relationship whatsoever to wage-and-hour issues.
Courts typically reject such broad releases. In this circuit, for example, class action releases “may include claims not presented and even those which could not have been presented,” but only when “the released conduct arises out of the identical factual predicate as the settled conduct.”
In the context of an FLSA case in which the Court has an obligation to police unequal bargaining power between employees and employers, such broad releases are doubly problematic. As one court has concluded:
“An employee who executes a broad release effectively gambles, exchanging unknown rights for a few hundred or a few thousand dollars to which he is otherwise unconditionally entitled. In effect, the employer requests a pervasive release in order to transfer to the employee the risk of extinguishing an unknown claim.... Although inconsequential in the typical civil case (for which settlement requires no judicial review), an employer is not entitled to use an FLSA claim ... to leverage a release from liability unconnected to the FLSA.”69
This Court agrees, and indeed has rejected identical FLSA releases elsewhere.
These deficiencies must be remedied before approval is appropriate.
III. The Application for Attorneys’ Fees Is Inadequate
Courts in FLSA cases consider whether a proposed award of attorneys’ fees is reasonable.
The present submission includes none of this information. Especially problematic is the fact that counsel’s submission touts the fact that the proposed fee award is “a
It may be that counsel’s fee request is entirely commensurate with the amount of time that the lawyers spent on this case. But such determinations require evidence, and plaintiffs counsel has provided none. The fee request therefore cannot be approved.
Conclusion
The request to approve the proposed settlement is denied without prejudice to the filing of a new and complete motion for approval.
SO ORDERED.
. Compl. [DI 2] ¶ 39.
. Id. ¶ 30. Plaintiffs Lopez, Meló, and Ajtun allegedly worked at Two Boots Pizza for approximately eight months, three months, and
. Id. ¶ 4 (plaintiffs' non-tipped, non-delivery duties allegedly included "preparing salads, sweeping and mopping the basement and the area around the counter, scraping parmesan cheese, bringing up food and any other items needed by the kitchen staff, taking out the garbage, cleaning the basement after stocking every delivery, cleaning the bathrooms, windows and the sidewalk, bringing up sodas and placing them in the refrigerator, ripping apart cardboard boxes and tying them up, carrying down and stocking deliveries in the basement, washing pizza trays and placing them on the car for use the next day, bringing in and taking out the bicycles, cleaning tables and sweeping and mopping the entire place after closing, washing bathrooms at night and in the morning, bringing down the security doors after closing and going shopping to a Chinese store on Houston Street”).
. See id. ¶¶ 135-45 (alleging claims under 29 U.S.C. § 201 etseq.).
. See id. ¶¶ 146-50 (alleging failure to pay minimum wages under NYLL §§ 652(1), 663), 151-55 (alleging failure to pay overtime wages under NYLL §§ 190 et seq., 663), 156— 59 (alleging failure to pay spread of hours pay under NYLL §§ 190 et seq., 650 et seq., and 12 N.Y.C.R.R. §§ 142-2.4(a)), 160-62 (alleging failure to comply with record-keeping requirements under NYLL § 195(1)), 163-65 (alleging failure to provide wage statements under NYLL § 195(3)).
. "New York law provides that covered employees ... are entitled to an additional hour’s pay at the basic minimum hourly wage rate for any day in which 'the spread of hours’ — defined as ‘the interval between the beginning and end of an employee’s workday’ — exceeds 10 hours.” Doo Nam Yang v. ACBL Corp., 427 F.Supp.2d 327, 339 (S.D.N.Y.2005) (quoting 12 N.Y.C.R.R. § 142-2.18) (internal citation omitted).
. DI 2 ¶ 8 (citing 12 N.Y.C.R.R. § 146-1.3).
. See DI 2 ¶ 12 (stating that plaintiffs bring suit under both the FLSA and the Labor Law "on behalf of themselves, and other similarly situated individuals.”).
. Ltr. from J. Androphy to Court (Oct. 2, 2014) (“Androphy Ltr.”).
. Id. at 2.
. Compare id. at 2 ("Under the settlement, Defendants will pay $27,500 to settle all claims. Of the settlement amount, $16,500 will go to the Plaintiffs themselves, with $11,000 to go to Plaintiffs’ attorneys.”), with id. at 3 ("Under the settlement, and in accordance with their retainer agreements with the Plaintiffs, Plaintiffs' counsel receives $12,000
. Id. at 2.
. Id. at 2.
. Id. at 1.
. Id. at 2.
. Id. at 2-3.
. Id. at 1.
. Agreement § 8(A).
. Id. § 8(B).
. Id. § 8(E).
. Id. § 8(C).
. Id. § 8(D).
. Id.
. Id. § 5.
. Id.
. Id.
. Manning v. New York Univ., No. 98-cv-3300 (NRB), 2001 WL 963982, at *11 (S.D.N.Y. Aug. 22, 2001), aff'd on other grounds, 299 F.3d 156 (2d Cir.2002).
. Elliott v. Allstate Investigations, Inc., No. 07-cv-6078 (DLC), 2008 WL 728648, at *1 (Mar. 19, 2008) (discussing D.A. Schulte, Inc. v. Gangi, 328 U.S. 108, 113 n. 8, 66 S.Ct. 925, 90 L.Ed. 1114 (1946)).
. Compare Wolinsky v. Scholastic Inc., 900 F.Supp.2d 332, 335 (S.D.N.Y.2012) ("[A]n employee may not waive or otherwise settle an FLSA claim‘for unpaid wages for less than the full statutory damages unless the settlement is supervised by the Secretary of Labor or made pursuant to a judicially supervised stipulated settlement.”), with Picerni v. Bilingual Seit & Preschool Inc., 925 F.Supp.2d 368, 376, 378-79 (E.D.N.Y.2013) (concluding that "the FLSA is not exempt from the right of voluntary dismissal under Rule 41” and that parties may settle an FLSA case without court approval, though by doing so they assume the risk of a future court determining that the settlement was unreasonable and will not be enforced). The question hinges on the structure and purpose of the FLSA and has no import beyond the FLSA context.
.See, e.g., Armenta v. Dirty Bird Grp., LLC, No. 13-cv-4603 (WHP), 2014 WL 3344287, at *4 (S.D.N.Y. June 27, 2014) ("Taken to its logical conclusion, Picemi would permit defendants to circumvent the FLSA's 'deterrent effect’ and eviscerate FLSA protections.”); Archer v. TNT USA, Inc., 12 F.Supp.3d 373, 384 n. 2 (E.D.N.Y.2014) (discussing courts' reluctance to adopt the holding of Picerni).
. Lliguichuzhca v. Cinema 60, LLC, 948 F.Supp.2d 362, 365 (S.D.N.Y.2013) (scrutinizing an FLSA settlement after the parties sought court approval).
. Wolinsky, 900 F.Supp.2d at 335-36.
. Fujiwara v. Sushi Yasuda Ltd., No. 12-cv-8742 (WHP), 58 F.Supp.3d 424, 429-30, 2014 WL 5840700, at *1 (S.D.N.Y. Nov. 12, 2014).
. Cisek v. Nat’l Surface Cleaning, Inc., 954 F.Supp. 110, 110-11 (S.D.N.Y.1997).
. Wolinsky, 900 F.Supp.2d at 335 (internal quotation marks omitted).
. Id. at 336 (internal quotation marks omitted).
. Mamani v. Licetti, No. 13-cv-7002 (KMW), 2014 WL 2971050, at *2 (S.D.N.Y. July 2, 2014) (rejecting a proposed FLSA settlement agreement).
. See, e.g., Lizondro-Garcia v. Kefi LLC, 300 F.R.D. 169, 180 (S.D.N.Y.2014) (approving an FLSA settlement on the basis of such evidence).
. Plaintiff Lopez is to receive $700, plaintiff Melo is to receive $150, and plaintiff Ajtun is to receive $1,150. Agreement § 7(A)(i)-(iii).
. Id. § 7(A)(iv) (emphasis removed).
. Androphy Ltr. at 2.
. See discussion supra at pages 174-75.
. Camacho v. Ess-A-Bagel, Inc., No. 14-cv-2592 (LAK), 2014 WL 6985633, at *3 (S.D.N.Y. Dec. 11, 2014) (''Camacho I”).
. Armenia, 2014 WL 3344287, at *2; see also Joo v. Kitchen Table, Inc., 763 F.Supp.2d 643, 648 (S.D.N.Y.2011) ("[T]his Court joins the overwhelming consensus of district courts that have considered the issue to hold that an FLSA settlement cannot be sealed absent some showing that overcomes the presumption of public access.”) (surveying cases).
. Lugosch v. Pyramid Co. of Onondaga, 435 F.3d 110, 119 (2d Cir.2006).
. Id. at 119 (quoting United States v. Amodeo, 71 F,3d 1044, 1049 (2d Cir.1995)).
. United States v. Erie Cnty., 763 F.3d 235, 239 (2d Cir.2014).
. Wolinsky, 900 F.Supp.2d at 337.
. Tran v. Thai, No. 08-cv-3650 (LHR), 2009 WL 2477653, at *1 (S.D.Tex. Aug. 12, 2009) (internal quotation marks omitted).
. Camacho I, 2014 WL 6985633, at *3.
. Chao v. Gotham Registry, Inc., 514 F.3d 280, 283 (2d Cir.2008) (quoting 81 Cong. Rec. 4983 (1937) (message of President Roosevelt)).
. Stalnaker v. Novar Corp., 293 F.Supp.2d 1260, 1264 (M.D.Ala.2003).
. Dees v. Hydradry, Inc., 706 F.Supp.2d 1227, 1241 (M.D.Fla.2010).
. Camacho v. Ess-A-Bagel, Inc., No. 14-cv-2592 (LAK), 2015 WL 129723, at *2 (S.D.N.Y. Jan. 9, 2015) (“Camacho II").
. Poulin v. Gen. Dynamics Shared Res., Inc., No. 09-CV-58 (NKM), 2010 WL 1257751, at *2 (W.D.Va. Mar. 26, 2010) (quoting Schultz v. Capital Int’l Sec., Inc., 466 F.3d 298, 304 (4th Cir.2006)).
. Dees, 706 F.Supp.2d at 1242.
. See Elizabeth Wilkins, Silent Workers, Disappearing Rights Confidential Settlements and the Fair Labor Standards Act, 34 Berkeley J. Emp. & Lab. L. 109, 138 (2013) (noting that foreign-bom workers now comprise over 20 percent of those making poverty wages and that a "quarter of new immigrants are undocumented,” rendering such workers "particularly susceptible to intimidation”).
. See, e.g., Socias v. Vornado Realty L.P., 297 F.R.D. 38, 40 (E.D.N.Y.2014) ("Low wage employees, even when represented in the context of a pending lawsuit, often face extenuating economic and social circumstances and lack equal bargaining power; therefore, they are more susceptible to coercion or more likely to accept unreasonable, discounted settlement offers quickly.”).
. See, e.g., Lewis A. Kaplan, Litigation, Privacy and the Electronic Age, 4 Yale J.L. & Tech. (formerly Yale Symp. L. & Tech.) 1, 23 (2001).
. Wilkins, Silent Workers, 34 Berkeley J. Emp. & Lab. L. at 143.
. Guareno v. Vincent Perito, Inc., No. 14-cv-1635 (WHP), 2014 WL 4953746, at *1 (S.D.N.Y. Sept. 26, 2014).
. Dees, 706 F.Supp.2d at 1245.
. Wolinsky, 900 F.Supp.2d at 338 (rejecting a request to seal an FLSA settlement).
. Bouzzi v. F & J Pine Rest., LLC, 841 F.Supp.2d 635, 642 (E.D.N.Y.2012) (quoting Hens v. Clientlogic Operating Corp., No. 05-cv-381S (WMS), 2010 WL 4340919, at *4 (W.D.N.Y. Nov. 2, 2010)).
. It is important to note that not every non-disparagement clause in an FLSA settlement is per se objectionable. As consideration for a settlement payment, plaintiffs may contract away their right to say things that are insulting or calumnious about the defendants. But insofar as Section 8(C) would bar plaintiffs from making “any negative statement” about the defendants, it must include a carve-out for truthful statements about plaintiffs' experience litigating their case. Otherwise, such a provision contravenes the remedial purposes of the statute and, in this context, is not "fair and reasonable.”
. Dees, 706 F.Supp.2d at 1242.
. Id.
. Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 107 (2d Cir.2005) (internal quotation marks omitted).
. Moreno v. Regions Bank, 729 F.Supp.2d 1346, 1351 (M.D.Fla.2010).
. Camacho I, 2014 WL 6985633, at *4.
. Moreno, 729 F.Supp.2d at 1352.
. Wolinsky, 900 F.Supp.2d at 336-37.
. Id. at 336 (citing N.Y. State Ass'n for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1148 (2d Cir.1983)).
. Androphy Ltr. at 3.
. See, e.g., Mamani, 2014 WL 2971050, at *3 (rejecting a fee request in the absence of substantiating evidence).
.See, e.g., Aguilera v. Cookie Panache, No. 13-CV-6071 (KBF), 2014 WL 2115143, at *2-4 (S.D.N.Y. May 20, 2014).