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Amaro v. Barbuto, LLC

United States District Court, S.D. New York

February 2, 2017

Martin Amaro, Plaintiff,
Barbuto, LLC, et al. Defendants.


          ALISON J. NATHAN United States District Judge.

         On March 1, 2016, the Plaintiff, Martin Amaro, filed a complaint in the Southern District of New York alleging violations of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq., and the New York Labor Law ("NYLL"), Art. 19 §§ 190 and 650 et seq. See Dkt. No. 1 (hereafter, "Complaint"). On March 8, 2016, the parties informed the Court that they had reached a settlement. See Dkt. No. 8. On April 12, 2016, the parties submitted a written settlement agreement for the Court's approval, along with a joint letter explaining their views on the fairness of the settlement. See Dkt. No. 11 (hereafter "Joint Letter"). The settlement agreement provides for a settlement fund of $5, 000, of which $2, 500, labeled "unpaid wages and damages, " will be distributed to Mr. Amaro, and $2, 500 will be distributed to the Law Offices of Robert L. Kraselnik as attorney's fees and costs. Dkt. No. 11, Ex. 1 ¶ 2 (hereafter "Settlement Agreement" or "SA"). Although the settlement appears to be fair and reasonable, the Court concludes that the parties have failed to submit sufficient information for the Court to properly make such a determination. Additionally, the Court cannot approve the settlement's confidentiality provisions and attorney's fees provisions in their current form. Approval of the settlement is thus denied, with the understanding that if the parties address the Court's concerns and resubmit, the settlement will likely be approved.


         In order to serve the FLSA's purpose of ensuring "a fair day's pay for a fair day's work, " settlements in FLSA cases must be approved by a court or by the Department of Labor. Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199, 206 (2d Cir. 2015) (quoting A/£ Phillips, Inc. v. Walling, 324 U.S. 490, 493 (1945)). As a result of this requirement, the Plaintiffs claims in this case cannot be dismissed with prejudice until the Court determines that the settlement is "fair and reasonable." Wolinsky v. Scholastic Inc., 900 F.Supp.2d 332, 335 (S.D.N.Y. 2012). A "fair and reasonable" settlement is one that "reflects a reasonable compromise of disputed issues rather than a mere waiver of statutory rights brought about by an employer's overreaching." Mamani v. Licetti, No. 13-CV-7002 (KMW) (JCF), 2014 WL 2971050, at *1 (S.D.N.Y. July 2, 2014) (internal quotation marks omitted).

         In order to fully evaluate the fairness of a proposed settlement, the Court must receive sufficient information from the parties as to "the bona fides of the dispute." Id. at * 1 (quoting Dees v. Hydradry Inc., 706 F.Supp.2d 1227, 1241 (M.D. Fla. 2010)). At a minimum, the Court thus must receive information describing "the nature of plaintiffs' claims, ... 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." Lopez v. Nights of Cabiria, LLC, 96 F.Supp.3d 170, 176 (S.D.N.Y. 2015). In evaluating the parties' proposed settlement, the Court will assess (1) the sufficiency of the information presented to the Court supporting the estimate of the plaintiffs maximum recovery; (2) the non-disparagement and confidentiality provisions; and (3) the proposed award of fees and costs.[1


         A. The Sufficiency of the Information Presented to the Court

         In the parties' joint letter, they conclude that, "[a]dding federal and state damages plus wage statement violations would result in a total of $4, 250 if all of Plaintiff s allegations were accepted at trial and all possible damages were awarded." Joint Letter, at 1. The parties explain this number as follows: prior to filing the Complaint, the Plaintiff, accompanied by counsel, engaged in "extensive negotiations" with the Defendants. Id. As part of these negotiations, the Defendants provided to the Plaintiff for review comprehensive pay and time records kept by the Defendants. The Defendants argued that the Plaintiff was owed nothing. On the basis of these records, the Plaintiff determined he was owed "as much as $1, 200 in unpaid wages." Id. The Court agrees that, assuming $4, 250 to be a reasonable estimate of the Plaintiffs maximum recovery, and assuming the case to indeed not be clear cut (as the parties suggest in the letter), a $5, 000 settlement reasonably accounts for the risks of litigation. Joint Letter at 2. At present, however, the Court lacks sufficient information to assess the reasonableness of this estimate.

         First, though the parties provide a general overview of the methodology through which they arrived at this number, they do not indicate how many hours the Plaintiff believed he worked without being appropriately compensated, at what rate he should have or was paid for those hours, and by how much (or with what frequency) the Plaintiff was undercompensated or uncompensated. See Banegas v. Mirador Corp., No. 14-CV-8491 (AJN), 2016 WL 1451550, at *2 (S.D.N.Y. Apr. 12, 2016) (declining to approve a settlement where the parties failed to provide "each party's estimate of the number of hours worked and the applicable wage" (quoting Mamani, 2014 WL 2971050, at *1)). Further, though the parties indicate that the "Defendants took a no-pay position, alleging that Plaintiff occasionally forgot to clock out, " whereas the Plaintiffs "review of the documents .. . indicated . . . that Plaintiff was arguably owed as much as $1, 200 in unpaid wages, " they do not indicate why the data could support both interpretations, nor whether the Defendants maintain that position. Joint Letter at 1. In resubmitting the proposal, the parties should provide a clearer description of how the Plaintiff arrived at his estimate of the maximum possible recovery and affirm whether the Defendants continue to dispute this number, so the Court can assess the reasonableness of the Plaintiffs number and the contours of the dispute.

         Second, as to the statutory damages, the parties do not indicate how these damages were calculated. See Complaint ¶ 45 (alleging Plaintiff was owed $150 a week as a result of violations of the New York Wage Theft Prevention Act)). The Court is thus unable to assess the calculation's reasonableness.

         Finally, the joint letter nowhere addresses the apparent discrepancy between the allegations in the Complaint and the assumptions in the joint letter. For example, in the Complaint, the Plaintiff alleges that the Defendant had a policy of not providing proper wage statements, id, ¶ 20, not paying the minimum wage, id. ¶18, not paying the proper overtime rate, id. ¶ 17, and failing to pay spread of hours premiums, ¶ 19. The joint letter, however, appears to indicate that the Plaintiff concedes that the only way he was improperly compensated pertained to "correct overtime compensation, " without addressing any of these remaining allegations. Joint Letter at 1. There are other examples, none of which is explained.[2] See Banegas, 2016 WL 1451550, at *2 (declining to approve a FLSA settlement absent explanation why the Plaintiffs estimates had significantly changed from those in the complaint).

         B. The Non-Disparagement and Confidentiality Provisions

         Second, the settlement includes two provisions the Court deems problematic. First, the "[c]ooperation" provision states that "[the Plaintiff] and [Defendants] mutually agree that they will not disparage each other and will say or do nothing to bring discredit upon the other." SA ¶ 4. Second, the settlement includes a confidentiality provision that restricts the Plaintiff from divulging to any "outlet, including newspapers, television stations, and radio stations ... the fact or existence of this Settlement Agreement, and . .. any aspect of any of the operations and activities of [the Defendants] as alleged by [Plaintiff] in the Action." Id. ¶ 6. The parties note that they "are willing to strike [the] provision[s] . . . should the Court deem it necessary." Joint Letter at 2.

         The Court concludes that the provisions should be struck. Non-disparagement clauses and confidentiality provisions "can be contrary to public policy because they prevent the spread of information about FLSA actions to other workers . . . who can then use that information to vindicate their statutory rights." Gaspar, 2015 WL 7871036, at *3. As to the non-disparagement clause, the "phrasing seems potentially overbroad, and is very similar to language" the Court has previously rejected as limiting the dissemination of truthful information. Id. Though the parties argue that the clause should be interpreted in conjunction with the more limited confidentiality provision, Joint Letter at 2, there is nothing in the settlement that requires such an interpretation. As such, the parties are instructed to either remove the provision or "narrowly tailor it to allow Plaintiffs to discuss their litigation of this case." Id.; see also Lopez, 96 F.Supp.3d at 180 n.65 ("It is important to note that not every ...

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