United States District Court, S.D. New York
CARLOS LEON-MARTINEZ, Himself and on behalf of all others similarly situated, et al., Plaintiffs,
CENTRAL CAFE & DELI, Jointly and severally, et al., Defendants.
OPINION AND ORDER
PITMAN, United States Magistrate Judge
matter is before me on the parties' joint application to
approve the parties' settlement (Letter from Thomas J.
Lamadrid, Esq., to the undersigned, dated Mar. 29, 2017
(Docket Item ("D.I.") 37) ("Lamadrid
Letter")). All parties have consented to my exercising
plenary jurisdiction pursuant to 28 U.S.C. § 636(c).
an action brought by four individuals who were formerly
employed by defendants as restaurant workers and seeks
allegedly unpaid wages, overtime premium pay and
spread-of-hours pay. The action is brought under the Fair
Labor Standards Act (the "FLSA"), 29 U.S.C.
§§ 201 et seq., and the New York Labor Law (the
"NYLL"). Plaintiffs also assert claims based on
defendants' alleged failure to maintain certain payroll
records and to provide certain notices as required by the
Wage Theft Prevention Act (the "WTPA"). Although
the action was commenced as a collective action with respect
to the FLSA claim, the parties reached the proposed
settlement prior to the matter being conditionally certified
as a collective action. Thus, the only parties to the
settlement are the named plaintiffs and the named defendants.
deny plaintiffs' allegations. Defendants claim that they
maintained weekly payroll reports for each plaintiff that
showed the number of hours plaintiffs worked each week, their
earnings for the first forty hours worked at the
employees' regular rate, their earnings for overtime
worked at the employees' overtime rate, spread-of-hours
pay, deductions for meals, additions for uniforms and
bonus/adjustment entries. Defendants also claim that
plaintiffs signed most of their weekly payroll reports.
a lengthy settlement conference on May 31, 2016 that was
attended by the parties and their counsel. There was a
protracted discussion of the strengths and weaknesses of the
parties' respective positions; however, the parties were
not able to come to a settlement at the conference. Rather,
the parties agreed to resolve the dispute in August 2016 for
a total settlement amount of $18, 000.00, to be distributed
among the plaintiffs based on the duration of each
plaintiff's employment with defendants. The parties have
also agreed that $642.44 of the settlement figure will be
allocated to reimburse plaintiffs' counsel for their
out-of-pocket costs, $5, 785.85 (or one-third) of the
remaining $17, 357.56 will be paid to plaintiffs' counsel
and that the balance will be paid to plaintiffs. The length
of employment of each plaintiff, the amount claimed by each
the net amount that will be received by each plaintiff after
deduction for legal fees and costs are as follows:
Length of Employment
Net Settlement Amount
Fernando Meza Ramos
Sanchez Jose Antonio Lopez
previously refused to approve the settlement agreement
(Amended Order, dated Dec. 21, 2016 (D.I. 36)). First, given
the relatively modest size of the settlement fund in
comparison to plaintiffs' claims, I ordered specific
information concerning defendants' assets. Second, the
settlement had an overly broad release, and it was unclear
what claims were being released. I ordered the parties to
more clearly and narrowly define what was being released.
parties have submitted a renewed application to approve their
settlement. In accordance with my previous Order, counsel
provided evidence of defendants' dire financial condition
(Letter from Jian Hang, Esq., to the undersigned, dated Mar.
29, 2017 (D.I. 38), Ex. A). Counsel has also revised the
release so that plaintiffs are releasing only those claims
arising under the FLSA, NYLL, WTPA, New York Code Rules and
Regulations and claims for unpaid minimum, regular and
overtime wages and for notice and recordkeeping penalties.
However, upon further review of the proposed settlement,
several significant problems remain.
the unexplained disproportionate allocation of the settlement
proceeds is not acceptable. The parties have allocated the
settlement funds based on the length of each plaintiff's
employment rather than the amount of damages each plaintiff
claims. As a result, Lopez would receive a smaller settlement
than Sanchez, even though Lopez claims greater damages than
Sanchez. Additionally, while Sanchez receives 4.8% of his
claimed damages, Ramos receives 3.8% of his damages,
Leon-Martinez receives 3.9% and Lopez only receives 1.3%. I
cannot approve the settlement without a rational explanation
for the allocation of the settlement proceeds.
the settlement agreement contains a provision prohibiting
plaintiffs from assisting in a lawsuit or proceeding against
defendants. Specifically, it provides that plaintiffs
"shall not hereafter directly or indirectly . . . assist
... in any lawsuit, charge, claim or proceeding, in any forum
. . . against Defendants arising out of or relating to any
allegation or claim that Plaintiff has brought in the Action,
unless directed by court order or subpoena" (Lamadrid
Letter, Ex. 1 ¶ 3). Such a provision in an FLSA
settlement is contrary to the remedial purposes of the
statute. See Zapata v. Bedoya, No. 14-CV-4114 (SIL),
2016 WL 4991594 at *2 (E.D.N.Y. Sept. 13, 2016); Lopez v.
Ploy Dee, Inc., 15 Civ. 647 (AJN), 2016 WL 1626631 at *3
(S.D.N.Y. Apr. 21, 2016) (Nathan, D.J.); Alvarez v.
Michael Anthony George Constr. Corp., No. 11 CV 1012
(DRH)(AKT), 2015 WL 3646663 at *1 (E.D.N.Y. June 10, 2015);
Lopez v. Nights of Cabiria, LLC, 96 F.Supp.3d 170,
178 (S.D.N.Y. 2015) (Kaplan, D.J.) .
the settlement agreement bars plaintiffs from ever working
for defendants or their parents, subsidiaries, affiliates,
successors, assigns or divisions (Lamadrid Letter, Ex. 1
¶ 6). A provision limiting plaintiffs' employment
opportunities is not acceptable. Baikin v. Leader Sheet
Metal, Inc., 16 Civ. 8194 (ER), 2017 WL 1025991 at *1
(S.D.N.Y. Mar. 13, 2017) (Ramos, D.J.). Such a provision is
in direct conflict with the FLSA's "primary remedial
purpose: to prevent abuses by unscrupulous employers, and
remedy the disparate bargaining power between employers and
employees." Cheeks v. Freeport Pancake House,
Inc., 796 F.3d 199, 207 (2d Cir. 2015), cert,
denied, 136 S.Ct. 824 (2016).
within 30 days of the date of this Order, the parties are to
provide a revised settlement agreement that eliminates the
foregoing issues and a rational explanation for the
allocation of the settlement proceeds.