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Sandoval v. Philippe North American Restaurants, LLC

United States District Court, S.D. New York

August 31, 2017

OSCAR SANDOVAL, et al., Plaintiffs,
v.
PHILIPPE NORTH AMERICAN RESTAURANTS, LLC, et al., Defendants.

          Kenneth D. Sommer David E. Gottlieb Wigdor LLP New York, New York Counsel for Plaintiffs

          Jamie S. Felsen Milman Labuda Law Group, PLLC New Hyde Park, New York Counsel for Defendants

          MEMORANDUM & OPINION

          Vernon S. Broderick United States District Judge.

         Plaintiffs Oscar Sandoval, Esteban Aca, Elmer Bonilla, Henrique Castillo, Edvin Chavez, Felix Maldonado Diaz, Alexandru Dobrin, Enrique Flores, Kerry Nohoth Hernandez-Rodriguez, Pablo Lainez, Jose Luis Maldonado Lopez, Martin Lopez, Edin Muratvoc, Juan Carlos Navarrete-Rodriguez, Kihel Noureddine, Daniele Perugini, Angel Quito, Leonardo Ramon, Flavio Soto, Filiberto Villalba, Edwin Zevallos, and Freddy Zevallos (collectively, “Plaintiffs”), on behalf of themselves and all other similarly-situated individuals in this putative class and collective action, without opposition from Defendants Dave 60 NYC, Inc., Philippe NYC I LLC, Philippe Chow East Hampton LLC, Philippe Chow Holdings LLC, Philippe Chow Mgmt LLC, Philippe Equities LLC, Merchants Hospitality, Inc., Philippe Chow, Abraham Merchant, Joseph Goldsmith, Steven Kantor, Steven Boxer, Richard Cohn, and Adam Hochfelder (collectively, “Defendants”), move for an order (1) granting preliminary approval of the proposed class and collective action Settlement Agreement and Release (the “Settlement Agreement”) reached by the parties in this action; (2) conditionally certifying the proposed class; (3) approving the proposed notice of settlement; and (4) appointing class counsel and class representatives. (Docs. 110, 111.) Plaintiffs had brought this action alleging that Defendants violated the Fair Labor Standards Act, 29 U.S.C. § 201 et seq (the “FLSA”), and New York Labor Law, § 190 et seq (the “NYLL”). For the reasons set forth herein, Plaintiffs' unopposed motion is DENIED.

         I. Factual and Procedural Background

         Plaintiffs and members of the proposed collective action are persons who were employed by Defendants as “Servers, ” “Bussers, ” “Runners, ” “Bartenders, ” “Barbacks, ” or similar service “tipped” positions who were not paid the prevailing minimum wage for all hours worked during the full statutory limitations period set by the FLSA. Plaintiffs are members of the proposed class action are persons who were similarly employed by Defendants as “Servers, ” “Bussers, ” “Runners, ” “Bartenders, ” “Barbacks, ” or similar service “tipped” positions who were subject to the NYLL and related state law claims during the full statutory limitations period. (Am. Compl. ¶¶ 6, 7.)[1] Plaintiffs alleged that Defendants (1) failed to pay minimum wage in violation of the FLSA and NYLL; (2) illegally retained tips, and distributed tips to ineligible employees of gratuities and “charges purported to be gratuities” in violation of the NYLL; (3) failed to pay spread-of-hours compensation in violation of the NYLL and NYCRR; (4) failed to pay wages for all hours worked in violation of the NYLL; (5) failed to pay overtime compensation in violation of the FLSA and NYLL; and (6) unlawfully furnished inaccurate wage statements. (Id. ¶ 5.)

         Plaintiffs commenced this action by filing the Complaint on January 27, 2016. (Doc. 1.) On March 7, 2016, Plaintiffs filed their Amended Complaint. (Doc. 72.) On March 25, 2016, I granted Defendants' request for a pre-motion conference, (Doc. 91), and on April 29, 2016, granted the parties joint request to stay all proceedings pending mediation, (Doc. 97). On March 24, 2017, after Plaintiffs requested that I lift the stay to allow the case to proceed, I lifted the stay and directed the parties to appear for a pre-motion conference in order to address Defendants' original arguments to dismiss the Amended Complaint and/or to compel arbitration. (Doc. 107.) I held a pre-motion conference on April 6, 2017, and on May 12, 2017, Plaintiffs submitted their unopposed motion for preliminary settlement approval. (Docs. 110, 111, 112.) On July 24, 2017, the parties further submitted a joint letter indicating that the United States Bankruptcy Judge in this matter had approved the terms of the Settlement Agreement with one “minor clarification.” (Doc. 113.)

         II. Discussion

         A. Preliminary Approval of the Class Settlement

         District courts have discretion to approve proposed class action settlements. Maywalt v. Parker & Parsley Petroleum Co., 67 F.3d 1072, 1079 (2d Cir. 1995). The parties and their counsel are in a unique position to assess the potential risks of litigation, and thus district courts in exercising their discretion often give weight to the fact that the parties have chosen to settle. See Yuzary v. HSBC Bank USA, N.A, No. 12 Civ. 3693 (PGG), 2013 WL 1832181, at *1 (S.D.N.Y. Apr. 30, 2013).

         Review of a proposed settlement generally involves preliminary approval followed by a fairness hearing. Silver v. 31 Great Jones Rest., No. 11 CV 7442 (KMW)(DCF), 2013 WL 208918, at *1 (S.D.N.Y. Jan. 4, 2013). To grant preliminary approval, a court need only find “probable cause to submit the [settlement] proposal to class members and hold a full-scale hearing as to its fairness.” In re Traffic Exec. Ass'n-E. R.R.s, 627 F.2d 631, 634 (2d Cir. 1980) (internal quotation marks omitted). Preliminary approval is typically granted “where the proposed settlement appears to be the product of serious, informed, non-collusive negotiations, has no obvious deficiencies, does not improperly grant preferential treatment to class representatives or segments of the class and falls within the range of possible approval.” Silver, 2013 WL 208918, at *1 (quoting In re Initial Pub. Offering Sec. Litig., 226 F.R.D. 186, 191 (S.D.N.Y. 2005)) (internal alteration omitted).

         Although the settlement here appears to be the result of serious investigations and arm's length negotiations conducted between the parties and before a private mediator, (see Pls.' Mem. 3-4), [2] I find that the broad release language contained in Section 5.1(E) removes the Settlement Agreement's terms from being reasonable.

         “In FLSA cases, courts in this District routinely reject release provisions that ‘waive practically any possible claim against the defendants, including unknown claims and claims that have no relationship whatsoever to wage-and-hour issues.'” Gurung v. White Way Threading LLC, No. 16-CV-1795 (PAE), 2016 WL 7177510, at *1 (S.D.N.Y. Dec. 8, 2016) (quoting Lopez v. Nights of Cabiria, LLC, 96 F.Supp.3d 170, 181 (S.D.N.Y. 2015)). “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.” Martinez v. GulluogluLLC, No. 15-CV-2727 (PAE), 2016 WL 206474, at *2 (S.D.N.Y. Jan. 15, 2016) (quoting Camacho v. Ess-A-Bagel, Inc., No. 14-CV-2592 (LAK), 2014 WL 6985633, at *4 (S.D.N.Y. Dec. 11, 2014)). The Court's obligation equally applies in the preliminary settlement approval ...


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