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Larrea v. FPC Coffees Realty Co., Inc.

United States District Court, S.D. New York

May 5, 2017

GERMAN LARREA, individually and on behalf of others similarly situated, Plaintiff,


          RONNIE ABRAMS, United States District Judge

         Plaintiffs German Larrea and Segundo Bermejo bring this action against Defendants FPC Coffees Realty Co., Fabrizio Prim Cavallacci, and Elena Batyuk for alleged violations of the Fair Labor Standards Act ("FLSA") and the New York Labor Law ("NYLL"). Before the Court is the parties' application for approval of a settlement agreement. For the reasons set forth below, the Court declines to approve the proposed settlement agreement at this time.


         From approximately October 1994 to December 2014, Larrea worked as a cook at Caffe Reggio, an Italian restaurant owned by Cavallacci and Batyuk. See Compl. ¶¶2, 15 (Dkt. 1). Larrea alleges that he regularly worked more than forty hours per week without receiving minimum wage or overtime compensation. See Id. ¶ 9.

         On March 2, 2015, Larrea initiated this action on behalf of himself and all others similarly situated. Larrea asserted six claims for violations of the FLSA and the NYLL. See Id. ¶¶ 69-90. Two months after notifying the Court that they had reached a settlement, see Dkt. 33, the parties submitted a settlement agreement and a letter setting forth their views on why the agreement is fair and reasonable, see Dkt. 37. The Court ordered Plaintiffs to submit contemporaneous billing records documenting the hours worked by each of their attorneys, see Dkt. 38, which Plaintiffs filed shortly thereafter, attaching billing records for one of the attorneys identified in their application, see Dkt. 39.


         "To promote FLSA's purpose of ensuring 'a fair day's pay for a fair day's work, ' a settlement in a FLSA case must be approved by a court or the Department of Labor." Hyun v. Ippudo USA Holdings, No. 14-CV-8706 (AJN), 2016 WL 1222347, at *1 (S.D.N.Y. Mar. 24, 2016) (quoting Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199, 206 (2d Cir. 2015)). To obtain approval, the parties must demonstrate that their agreement is "fair and reasonable." Beckert v. Ronirubinov, No. 15-CV-1951 (PAE), 2015 WL 8773460, at *1 (S.D.N.Y. Dec. 14, 2015) (citation omitted). "A fair settlement must reflect a reasonable compromise of disputed issues rather than a mere waiver of statutory rights brought about by an employer's overreaching." Chauca v. Abitino 's Pizza 49th St. Corp., No. 15-CV-06278 (BCM), 2016 WL 3647603, at *1 (S.D.N.Y. June 29, 2016) (quoting Mamani v. Licetti, No. 13-CV-7002 (KMW), 2014 WL 2971050, at *1 (S.D.N.Y. July 2, 2014))). "In determining whether the proposed settlement is fair and reasonable, a court should consider the totality of circumstances, including but not limited to the following factors: (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." Wolinsky v. Scholastic Inc., 900 F.Supp.2d 332, 335 (S.D.N.Y. 2012) (internal quotation marks omitted).


         The Court addresses five aspects of the proposed settlement agreement: (1) the settlement amount, (2) the release provision, (3) the confidentiality provision, (4) the non-disparagement provision, and (5) the attorneys' fees provision. While the Court finds that the proposed settlement amount is fair and reasonable, the proposed agreement must be rejected on the basis of the remaining four aspects discussed below.

          A. Settlement Amount

         Under the proposed settlement agreement, Defendants agree to pay Plaintiffs a total of $130, 000 in three installments. See Fairness Letterat 2 (Dkt. 37). Plaintiffs estimate that they are entitled to a maximum recovery of $300, 000 in back wages, including cumulative or "stacked" awards of liquidated damages under the FLS A and the NYLL. See Id. Excluding one of the two of liquidated damages awards, Plaintiffs represent that their maximum recovery would be $212, 000. See Id. The proposed settlement amount thus represents approximately 43 percent of Plaintiffs' anticipated maximum recovery including cumulative liquidated damages, or 61 percent of Plaintiffs' maximum recovery excluding one award of liquidated damages.

         Under the circumstances of this case, this amount is fair and reasonable. While it falls short of the maximum amount Plaintiffs assert they might have recovered at trial, this amount is significant "in light of the legal and evidentiary challenges that would face the plaintiffs in the absence of a settlement." Lopez v. Poko-St. Ann L.P., 176 F.Supp.3d 340, 342 (S.D.N.Y.2016). In particular, the parties represent that this litigation involved "sharply contested factual and legal disputes that went to the heart of Plaintiffs' claims, " including a dispute regarding the dates on which Plaintiffs worked at Caffe Reggio. In addition, because Defendants produced employment records to support their position, it would likely be more difficult for Plaintiffs to establish liability solely on the basis of their testimony, as plaintiffs in some wage-and-hour cases are able to do. See Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687-88 (1946); Kuebel v. Black & Decker Inc., 643 F.3d 352, 364 (2d Cir. 2011). Finally, Plaintiffs' ability to collect on any judgment in this case would be complicated by the fact that Caffe Reggio's owner does not live in the United States. See, e.g., Howard v. Don Coleman Advert. Inc., No. 16-CV-5060 (JLC), 2017 WL 773695 (S.D.N.Y. Feb. 28, 2017) (finding that a plaintiffs "serious concerns about collectability . . . 'militates in favor of finding a settlement reasonable'" (quoting Lliguichuzhca v. Cinema 60, LLC, 948 F.Supp.2d 362, 365 (S.D.N.Y. 2013))). In light of these risks and challenges, the proposed settlement amount represents a substantial recovery.

         This amount is also reasonable when viewed as a percentage of Plaintiffs' maximum recovery. On the basis of the parties' submissions, the Court finds that Plaintiffs' maximum recovery was $212, 000, which excludes cumulative liquidated damages under the FLSA and the NYLL, in light of the "emerging jurisprudential trend . . . that an employee may not recover cumulative liquidated damages under both the FLSA and NYLL for overlapping claims." Hengjin Sun v. China 1221, Inc., No. 12-CV-7135 (RJS), 2016 WL 1587242, at *4 (S.D.N.Y. Apr. 19, 2016); see also Chowdhury v. Hamzan Express Food Corp., 666 F.App'x 69, 61 (2d Cir. 2016) (summary order). The proposed settlement thus represents approximately 61 percent of Plaintiffs' maximum recovery, a portion exceeding that often approved by courts in this District. See, e.g., Hyun, 2016 WL 1222347, at *2 (approving a settlement amount of approximately 51 percent of plaintiffs' maximum recovery); Beckert, 2015 WL 8773460, at *2 (approving a settlement of approximately 25 percent of the maximum possible recovery). The Court thus finds that the parties' proposed settlement amount is fair and reasonable.

         B. ...

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