United States District Court, S.D. New York
OPINION & ORDER
A. ENGELMAYER UNITED STATES DISTRICT JUDGE.
January 3, 2018, the parties to this Fair Labor Standards Act
("FLSA") and New York Labor Law ("NYLL")
action applied for approval of a proposed settlement
agreement under which defendants Frank Senior and Wajahat Ali
Shah would pay $6, 784.73 to plaintiff Syed Bukhari and $4,
415.27 to his attorney, Delmas A. Costin, Jr., Esq., of the
Law Office of Delmas A. Costin, Jr., PC, in attorney's
fees and costs. Dkt. 41, Ex. 2 (the "Agreement").
the Agreement is legally satisfactory, and the Court would be
prepared to approve the overall settlement sum of $11, 200 as
substantively reasonable and achieved through procedurally
fair means. Two features of the Agreement, however, make it
impossible for the Court to approve it in present form.
there is a discrepancy between the division of settlement
funds set forth in the Agreement and the division of funds
set forth in the January 3, 2018 letter authored by Mr.
Costin. See Dkt. 41 (the "Letter"). In the
Letter, Mr. Costin represents that the $11, 200 in settlement
funds would be divided as follows: $6, 815.15 to plaintiff;
$3, 733.33 to Mr. Costin in fees; and $651.52 to Mr. Costin
in reimbursement of costs. See Id. at 2. This
calculation yields a total payout for Mr. Costin of $4,
384.85-compensation the Court is prepared to deem reasonable
as reflecting a 33.33% fee and a reasonable estimate of
costs. See Thornhill v. CVS Pharmacy, Inc., No. 13
Civ. 5507 (JMF), 2014 WL 1100135, at *3 (S.D.N.Y. Mar. 20,
2014) (collecting cases that reduce attorneys' fees
greater than 33% of the settlement value). Per the Agreement,
however, Mr. Costin is set to receive a total of $4, 415.27
in fees and costs: $2, 015.15 from defendant Senior and $2,
400.12 (i.e., 36 payments of $66.67) from defendant
Ali Shah. See Agreement ¶ 2. Assuming the same
$651.52 in costs as described in the Letter, the Agreement
apparently contemplates $3, 763.75 in fees for Mr. Costin, or
33.60% of the total settlement amount.
Court leaves it to the parties to resolve this discrepancy,
after which the Court will take up its duty to ascertain
independently the reasonableness of the fee request.
Penaflel v. Rincon Ecuatoriano, Inc., No. 15 Civ.
112 (PAE), 2015 WL 7736551, at *2 (S.D.N.Y. Nov. 30, 2015)
(citing 29 U.S.C. § 216(b) (allowing a
"reasonable attorney's fee") (emphasis
in PenafieJ)). For the time being, however, the
Court directs Mr. Costin to inform the unrepresented
defendants that absent unusual circumstances, courts in this
District typically will not approve attorney's fees in an
amount greater than one third of the total settlement amount.
the Agreement contains an unacceptably overbroad general
release, under which the parties agree to a mutual release of
all claims they may have against each other. The relevant
provisions require Bukhari to waive any claim of any kind,
known or unknown, that he might ever have had against
defendants "arising from or concerning in any way [his]
employment by or association with Defendants." Agreement
¶ 5. 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." Lopez v. Nights of Cabiria,
LLC, 96 F.Supp.3d 170, 181 (S.D.N.Y. 2015); see also
Garcia v. Jambox, Inc., No. 14 Civ. 3504 (MHD), 2015 WL
2359502, at *3-4 (S.D.N.Y. April 27, 2015) (provision
releasing defendants "from any and all charges,
complaints, claims, and liabilities of any kind
whatsoever" was "not 'fair and reasonable'
because it encompasse[d] far too broad a range of possible
claims"). Indeed, as the Second Circuit has noted, such
an "overbroad release, " like that in Nights of
Cabiria, "highlights the potential for abuse in
[FLSA] settlements, and underscores why judicial approval in
the FLSA setting is necessary." Cheeks v. Freeport
Pancake House, Inc., 796 F.3d 199, 206 (2d Cir. 2015)
(citing Nights of Cabiria, 96 F.Supp.3d at 181).
provision here is of such an overly broad nature. It requires
Bukhari to "release and forever discharge Defendants . .
. from any and all claims, known or unknown, asserted or
unasserted, which [Bukhari] ha[s] or may have against
[defendants] . . . arising from or concerning in any way
[Bukhari's] employment by or association with
Defendants." Agreement ¶ 5. The Agreement then
recites, at length, a non-exclusive list of statutes and
common law claims from which Bukhari purports to release
defendants, including under the Employee Retirement Income
Safety Act of 1974 ("ERISA"), the Civil Rights Acts
of 1964 and 1991, and the Sarbanes-Oxley Act of 2002,
Id. Also released are any claims sounding in
"contract" or "tort." Id. This
provision is "too sweeping to be 'fair and
reasonable' and so must be rejected."
Lazaro-Garcia v. Sengupta Food Servs., 15 Civ. 4259
(RA), 2015 WL 9162701, at *2 (S.D.N.Y. Dec. 15, 2015)
(quotation marks omitted). Consistent with the case authority
in this area, "[f]he Court will not approve a release
provision that extends beyond the claims at issue in this
action." Martinez v. Gulluoglu LLC, No. 15 Civ.
2727 (PAE), 2016 WL 206474, at *2 (S.D.N.Y. Jan. 15, 2016)
(citing Lazaro-Garcia, 2015 WL 9162701, at *2).
fact that the general release is facially mutual, although
favoring the settlement, does not salvage it, absent a sound
explanation for how this broad release benefits the plaintiff
employee. In the Agreement, defendants agree to "release
and forever discharge [Bukhari] . . . from any and all
claims, known and unknown, asserted or unasserted, which the
Defendants have or may have against [Bukhari] as of the date
of execution of this Agreement. . . arising from or
concerning in any way [Bukhari's] employment by or
association with Defendants including, but not limited to,
any claims under federal, state or local law, rule,
regulation, or ordinance." Agreement ¶ 6. Several
courts in this district have permitted general releases so
long as they are mutual. See Souza v. 65 St. Marks
Bistro, 15 Civ. 327 (JLC), 2015 WL 7271747, at *5-7
(S.D.N.Y. Nov. 6, 2015) (rejecting a general release
provision unless the parties amended it to make it mutual
"in all respects, " so as to enable the parties to
"walk away from their relationship . . . without the
potential for any further disputes" and requiring an
acknowledgement from plaintiffs regarding any other claims
they would be releasing in the settlement); Lola v.
Skadden, Arps, Meagher, Slate & Flom LLP, 13 Civ.
5008 (RJS), 2016 WL 922223, at *2 (S.D.N.Y. Feb. 3, 2016)
(permitting a mutual general release provision in a
settlement agreement, for the same reason as in Souza);
Cionca v. Interactive Realty, LLC, 15 Civ. 5123 (BCM),
2016 WL 3440554, at *3-4 (S.D.N.Y. June 10, 2016) (same).
But, in the decision the Court finds most persuasive, Judge
Nathan rejected an unexplained mutual general release
provision. See Flores-Mendieta v. Bitefood Ltd., 15
Civ. 4997 (AJN), 2016 WL 1626630, at *2 (S.D.N.Y. Apr. 21,
2016) (rejecting mutual general release because "the
Court cannot 'countenance employers using FLSA
settlements to erase all liability whatsoever in exchange for
. . . payment of wages allegedly required by
statute'") (quoting Nights of Cabiria, 96
F.Supp.3d at 181)). This Court, too, is concerned that
despite the formal reciprocity of such releases, their
practical effect in some cases may be lopsided because they
may stand to benefit only the employer defendant, who
realistically may be less likely than the employee plaintiff
to have latent claims against its adversary.
benefit to Bukhari from the broad mutual release is, at least
on the present record, elusive. The Agreement does not
reveal, and the parties have not proffered, any
claim that defendants conceivably could have had against
Bukhari, or any other benefit to him from forgoing all
potential claims against defendants. Defendants' release
of all their claims against him appears an empty gesture-the
equivalent of giving away ice in the winter-such that the
release, while mutual in form, appears one-sided as a matter
of economic substance. It is thus not materially different
from the broad employee release provisions that courts in
this District, in declining to approve FLSA settlement
agreements, have consistently held impermissible. Either a
narrower release consistent with the standards above or a
concrete and persuasive explanation of the practical benefit
Bukhari stands to realize in exchange for broadly releasing
all claims against defendants will be required before the
Court will approve a settlement here.
foregoing reasons, the Court declines to approve the
Agreement at this time. The parties may proceed in one of the
following three ways.
parties may file a revised agreement by February 2, 2018 that
is consistent with the discussion here with regard to the
Agreement's release provision. Upon filing of a revised
agreement, the Court will then assess the fairness and
reasonableness of the proposed settlement and its provision
for attorney's fees and costs.
parties may file a joint letter by February 2, 2018 that
indicates their intention to abandon settlement and to
continue to litigate this matter. If they do so, the Court
will set a next conference in this matter, which will serve
as a pre-motion conference at which the Court will discuss
and set a briefing schedule for any motions for summary
judgment, or, if no such motions are to be filed, set a trial
parties may stipulate to a dismissal of this case
without prejudice, as such settlements do not, based
on the current case law, require court approval. See
Martinez, 2016 ...