United States District Court, S.D. New York
MEMORANDUM AND ORDER
KEVIN CASTEL UNITED STATES DISTRICT JUDGE.
case underscores the wisdom of judicial or administrative
review of all settlements of claims brought under the Fair
Labor Standards Act (“FLSA”), 29 U.S.C. §
201, et seq. See Cheeks v. Freeport Pancake House,
Inc., 796 F.3d 199 (2d Cir. 2015). For reasons
explained, this Court concludes that settlement of a FLSA
action accomplished through a unilateral dismissal of the
complaint by plaintiff is not exempt from review.
41(a)(1)(A), Fed. R. Civ. P., permits a plaintiff to
unilaterally dismiss an action without prejudice and without
court approval. Plaintiff filed a “Notice of Voluntary
Discontinuance Without Prejudice” before an answer or
appearance was filed. (Docket # 14.) Plaintiff's
“Notice” was prepared and submitted with a
signature line for the Court to enter the document as an
order, and the Court complied. (Docket # 15.)
the plaintiff, Issa Seck, who had been represented by an
attorney, Abdul K. Hassan, complained that he had not been
paid monies that were promised to him in a settlement with
defendants. (Docket # 16.) Because the underlying claims
included one brought under FLSA, the Court gleaned from
Seck's letter that this was not a true dismissal without
prejudice, but a settlement with an adverse party that had
not been submitted for judicial review pursuant to
Cheeks. Within days of Seck's letter, the Court
entered the following order: “By March 28, 2017, Mr.
Hassan shall disclose to the Court the amount of all fees
paid to him for his services with a copy of the retainer
agreement. He shall also explain why the settlement agreement
was not submitted to the Court for review and approval
pursuant to Cheeks . . . . Failure to comply will
result in sanctions and disgorgement of all fees received by
Mr. Hassan.” (Docket # 18.)
response, Hassan revealed that he had negotiated a settlement
with the two named defendants that fully and finally
extinguished Seck's claims against them. (Docket # 20.)
In this settlement, Hassan's payday exceeded that of his
client: $12, 000 would be paid to Seck and $13, 000 in
attorneys' fees to Hassan. Seck's portion would be
paid in installments as would Hassan's. Hassan, who had
been counsel to the losing party in Cheeks, asserted
that no judicial review of the settlement was required,
relying on footnote 2 of Cheeks, which left
“for another day” the question of whether a
“stipulation without prejudice” requires review.
796 F.3d at 201 n.2.
requires approval from the Department of Labor or a district
court when FLSA claims are settled through a stipulation of
dismissal with prejudice. 796 F.3d at 206. The Second Circuit
described the FLSA as “a uniquely protective statute,
” and concluded that review of settlements is a
safeguard against the “disparate bargaining power
between employers and employees.” Id. at 207.
Cheeks surveyed reasons that courts in this District
had rejected FLSA settlements, and described “the
potential for abuse in such settlements” as
“underscor[ing] why judicial approval in the FLSA
setting is necessary.” Id. at 206. Possible
abuses include “highly restrictive confidentiality
provisions, ” overbroad releases that “include
unknown claims and claims that have no relationship
whatsoever to wage-and-hour issues, ” attorneys'
fees ranging between 40 and 43.6 percent of the total
settlement payment that are unsupported by documentation, and
pledges by attorneys not to represent parties in future
claims against the same defendants. Id.
dismissal without prejudice would permit the plaintiff to
reassert his claims. But, here, the dismissal without
prejudice coupled with the terms of a settlement agreement
foreclose Seck from ever asserting his FLSA claim. The
“Settlement Agreement and Release” signed by Seck
contains release language that is overbroad and circular.
Paragraph 4 reads as follows:
In return for the payments identified in paragraph 2,
Plaintiff hereby unconditionally and irrevocably releases and
discharges from any and all claims, actions, causes of
action, rights, promises, sums of money due or liabilities
that he/they asserted in this action, or could have asserted
against defendants, consistent with Cheeks v. Freeport
Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015), as of
the date of this Agreement, and covenants not to sue
Defendants with respect to any such released claim.
(Docket # 20 Ex. 1.)
public record initially presented to the Court implicitly
states that Seck is free to reassert his FLSA claim, i.e. by
its express terms the dismissal is without prejudice. But in
truth and in fact, under the terms of a hidden settlement
agreement, Seck forever forfeited his right to reassert his
FLSA claim. Taken as a whole and in the context of
Cheeks, this is deceptive conduct. A settlement
containing a release that extinguishes the right to bring a
claim in the future forecloses the claim as certainly as a
stipulation of dismissal with prejudice. The Court concludes
that it falls within the category of settlements that require
conclusion is consistent with the holdings of other judges of
this Court who have been faced with accepted Rule 68, Fed. R.
Civ. P., offers of judgment in the FLSA context. See
Sanchez v. Burgers & Cupcakes LLC, 16 cv 3862 (Mar.
16, 2017)(Judge Caproni) (collecting cases); but see Baba
v. Beverly Hills Cemetery Corp., 15 cv 5191(CM), 2016 WL
2903597, at *1 (May 9, 2016)(Chief Judge McMahon) (expressing
concern over the perceived gap created by Rule 68).
to this particular settlement agreement, it purports to
release claims only to the extent “consistent with
Cheeks.” It is circular and begs the question
of what Cheeks allows a party to do. As an example
of appropriate release language, this Court has previously
approved a FLSA settlement conditioned upon modification of
the language to release only claims (1) relating to wages and
hours, including those under FLSA, N.Y. Labor Law, N.Y. Code
of Rules and Regulations or common law; (2) relating to
retaliation for protected activity concerning wages or hours;
(3) relating to the negotiation and execution of the
Agreement and Release; or (4) asserted in the Action.
Guzman v. Patsys Pizzeria, 15 Civ. 7220 (PKC)
(Docket # 34) (Feb. 21, 2017).
from the scope of the release, there is the additional issue
of the fees to be awarded Hassan. Cheeks cited to
undocumented fee awards between 40 and 43.6 percent of the
total settlement as an example of “the potential for
abuse” in FLSA settlements. 796 F.3d at 206. Here, the
settlement agreement provides for three payments of $4, 000
to Seck, totaling $12, 000. Hassan is ...